Congress, Yet Again, Cautions DOJ on Its Music Antitrust

The Senate’s Subcommittee on Antitrust, Competition Policy, and Consumer Rights recently held an antitrust oversight hearing. In their questioning to Justice Department antitrust head Makan Delrahim, Sens. Mike Lee (R-Utah) and Patrick Leahy (D-Vt.) echoed the concerns that many songwriters and small businesses have expressed about the DOJ’s review of the department’s agreements with the American Society of Composers, Authors, and Publishers and Broadcast Music Inc., the music industry’s two biggest licensing organizations. Unfortunately, DOJ’s response didn’t sufficiently address the inquiries that have been made by Congress and the industry at large.

For readers who don’t know, ASCAP and BMI manage more than 90 percent of the licensing rights in the music industry. To prevent them from discriminating and raising prices on the businesses dependent on them for licenses, DOJ imposed consent decrees in 1941. The decrees prohibit anticompetitive behavior and established the blanket license system, which allows any business, large or small, to receive rights to all their works upon request at a set price.

At the hearing, Lee asked Assistant Attorney General Delrahim the right question: The way consumers obtain music has changed over the last 80 years, but what has really changed on the licensing side since the DoJ concluded its last last investigation just three years ago that suggests the consent decrees may no longer be needed? Delrahim listed new market participants as one of the primary reasons. However, the truth is that the only other two major licensing organizations aside from ASCAP and BMI, SESAC (formed in 1930) and Global Music Rights (formed in 2013) ,collectively control just a slither of the marketplace. They already existed when the DoJ completed its last two-year review of the music decrees in 2016.

The only significant new development on the licensing side since the last review is that, shortly after DoJ issued the 2016 opinion, antitrust litigation was brought against GMR. With SESAC having to go under a similar antitrust arrangement to ASCAP and BMI in 2015, the GMR suit makes some form of antitrust action against all four of the groups. This point should strengthen the case for DOJ involvement on the licensing side of music, –not weaken it. One may expect to see this perspective come from an ASCAP and BMI talking point sheet, but not from the highest antitrust authority in the land.

During the hearing, Delrahim also argued that the decrees are “a thumb on the scale with respect to the licensing and licensing rights,” suggesting that it may be appropriate for the DOJ to remove them to allow the “free market” to take hold. This argument is a false narrative. As all my past colleagues in the Justice Department accepted as undisputed fact, there is no free market in the music industry, nor will there ever be.

As alluded to earlier, in what “free market” can licensing organizations with little market share be deemed to have no restrictions on what they can charge for its music? In truth, it doesn’t matter how many licensing entities there are in the marketplace or how much market share they amass. The music licensing organizations base their entire existence off copyrights, which are monopolies created by the government. In the absence of DOJ oversight, if one licensing organization has the exclusive rights to even a small catalog of songs, it can charge whatever it wants, whenever it wants. That is why a dozen free-market organizations petitioned Attorney General William Barr to keep DoJ decrees in place.

It is not as if the consent decrees prohibit songwriters from negotiating on the free market if they choose to do so. Any songwriter can still choose to license music to businesses on his or her own while setting an individual rate. The consent decrees only apply when competing songwriters and music publishers collude together through ASCAP and BMI to fix prices. Generally speaking, competitors banding together to set a standard price is not the hallmark of a free marketplace.

The DOJ has already received public letters cautioning against it from acting overly aggressively on the consent decrees from many representatives, including Sen. Lindsey Graham (R-S.C.), the chairman of the Senate Judiciary Committee, and House Judiciary Committee Chairman Jerry Nadler (D-N.Y.). When two senators of such polarizing worldviews actually agree on something, it is certainly worth noting. What’s more, Congress enacted legislation last year that promoted greater oversight over the DoJ’s handling of this issue.

Attorney General Barr should heed to the input from Congress. Removing or significantly altering the decrees would result in increased costs for consumers and millions of businesses, all while harm the earning ability for tens of thousands of songwriters.

Here’s hoping that the Trump administration learns all the facts and ultimately comes to the right decision, just as DOJ did three years ago when they left the music restraints untouched.

Peter Ferrara served on the White House Domestic Policy Council under President Ronald Reagan, and as associate deputy attorney general for Attorney General William Barr under President George H.W. Bush; he is the Dunn Liberty Fellow in Economics at the Kings College in New York, a senior policy adviser to the National Tax Limitation Foundation and a freelance author.

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