DOJ Should Not Unilaterally Disrupt Music Consent Decrees

In July, the Department of Justice (DOJ) held a two-day workshop on consent decrees that DOJ first struck with two music performing rights organizations (PROs) nearly 80 years ago. Those decrees are still in place today. The PROs, the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI), license the right to play songs to radio stations, streaming services, television and movie studios, restaurants, bars, entertainment venues, and more.

The consent decrees first came about because of the market power held by ASCAP and BMI in the 1940s, and today the two PROs still “account for about 90% of the U.S. market in public performance rights.” DOJ is examining what if any changes should be made to the consent decrees.

ASCAP and BMI would like to see the consent decrees go away, though both have offered a transition plan to reduce market disruption from any termination of the decrees. Broadcasters, streaming services, restaurants, and many other businesses that pay for performing rights would like to see the consent decrees remain in place; to many, the decrees have contributed to decades of stable expectations and costs for licensing music.

NTU was one of more than 800 organizations to weigh in with public comments. We expressed our regret that government consent decrees can create market inefficiencies that last years, while arguing that removing the ASCAP and BMI consent decrees at this time could create undesirable and costly chaos in the music marketplace:

In general, NTU believes that consent decrees between federal antitrust authorities and private entities must be thoughtfully negotiated, rather than imposed with harsh terms the government might not otherwise be able to extract through formal litigation governed by stricter evidentiary rules. This has been especially pervasive (and to NTU troubling) in FTC’s actions toward high-tech firms. That said, stakeholders across the country have come to rely on the Department’s decades-old consent decrees with ASCAP and BMI.

… We encourage the Department of Justice to exercise its antitrust authority with prudence and restraint, keep Congress fully apprised of its review of the ASCAP and BMI consent decrees, and preserve the delicate balance that has afforded American consumers widespread, affordable, and easy access to millions of songs new and old.

Though not much about this debate has changed since we wrote those comments last year, the DOJ workshops offer an opportunity to revisit this critical issue.

It is regrettable that the music licensing market has been under DOJ decree for so long. As Assistant Attorney General (AG) Makan Delrahim noted in his opening remarks at the workshop:

The Justice Department’s consent decrees with ASCAP and BMI, for example, first went into effect in 1941, the year the United States entered WWII with the bombing of Pearl Harbor.

...when I became Assistant Attorney General in 2017, consent decrees from as far back as the 1890’s remained on the books.

Government interference in a marketplace should not have an 80-year impact, but it is under this long shadow of the 1941 consent decree that NTU and others have argued DOJ should not make any significant changes to the decrees at this time.

Consent decrees, if negotiated at all, should provide a light touch that avoids unnecessary interference with negotiations between private parties. And, as Assistant AG Delrahim argues, any DOJ consent decrees that are in place should promote market competition rather than hindering it.

To that end, one core element of the ASCAP and BMI arguments for removing the consent decrees does not make sense. The two dominant PROs argue that robust competition in the PRO space is a reason for ending the decrees, even while ASCAP acknowledges that these two businesses retain a 90-percent control of the marketplace.

A new competitor to the two PROs, Global Music Rights (GMR) - which only launched in 2013 - underscores this point in their comments on the consent decrees:

...while GMR offers the promise of innovation and a competitive alternative, it is today a small boutique operator, with a roster of about 80 songwriters and a catalog that comprises less than one percent of the universe of compositions offered by U.S. PROs.

Materially modifying, sunsetting or lifting the existing Decrees would wreak havoc on the marketplace, crushing the nascent competition that has just started to emerge...

As a taxpayer advocate that acknowledges bureaucratic ‘fixes’ to market problems can create long-term costs for consumers and taxpayers, NTU believes we must move in the direction of a competitive, free-market environment in which the ASCAP and BMI consent decrees are no longer necessary. But, as GMR notes, there is no effective competition in the marketplace outside of the two giants at the moment.

More importantly, a decree-free world should not be at the mercy of unelected bureaucrats at DOJ. As NTU and others have argued in their comments, Congress - and not DOJ - should take the lead on fostering a freer market in the future, with the participation of the many relevant stakeholders.

In August 2019, NTU wrote:

Removing or significantly altering these consent decrees without stakeholder input and a detailed, comprehensive replacement plan would disrupt the marketplace and negatively impact consumers’ access to their favorite musicians. In fact, many in Congress and across the music-licensing ecosystem have called for Congress to establish an alternative framework prior to any significant modification or termination of these decrees, including Senate Judiciary Committee Chairman Lindsey Graham (R-SC).

We also urged DOJ to keep Congress fully informed on any potential changes to the consent decrees, as required by the Music Modernization Act (MMA):

More importantly, the Department should keep Congress fully informed of its plans, and give members the opportunity to weigh in on proposed changes to the consent decrees. As you are well aware, the Department is required by the Music Modernization Act (MMA) to “provide timely briefings upon request of any Member of the Committee on the Judiciary of the Senate and the Committee on the Judiciary of the House of Representatives regarding the status of a review in progress of a consent decree between the United States and a performing rights society.”

At a minimum, DOJ must provide Congressional notification and oversight to ensure that modifications to the ASCAP and BMI consent decrees are subject to scrutiny from taxpayer and consumer advocates. More appropriately, Congress, and not DOJ, should take the lead on any future changes to the consent decrees.

Indeed, legislation is the best path forward, and it is a path that is ultimately more accountable to taxpayers and consumers than ongoing DOJ reviews and re-reviews. While the public has the opportunity to comment on either a Congressional or a DOJ process, lawmakers must answer to their constituents every two or six years while DOJ regulators do not have to answer to constituents.

There are, then, three important reasons for DOJ to avoid major changes to the ASCAP and BMI consent decrees at this time:

  1. Major, abrupt changes to the decrees would disrupt numerous industries and businesses that have come to rely on a decades-old structure, even if that structure can be clunky and in need of review;
  2. Despite claims to the contrary, there is not robust competition in the PRO space beyond ASCAP and BMI at this time, and that fact should inform DOJ’s efforts to foster competition among PROs; and
  3. Whenever changes are made to the decrees, Congress - not DOJ - is the proper venue for debate over such changes.

All of the above demands that DOJ proceed with caution on these two 80-year old consent decrees. Perhaps more importantly, this experience should give the Department significant pause when implementing future decrees that unduly restrict market behavior.