Just days after the Department of Justice decided not to fight for a new 100% “full work” licensing requirement it adopted in the closing months of the Obama administration, it has dropped an even bigger bombshell. The DOJ is reviewing whether the decades-old consent decrees that govern radio’s licensing arrangement with ASCAP and BMI have outlived their usefulness.
Assistant U.S. Attorney Makan Delrahim, who oversees the DOJ’s Antitrust Division, called current music copyright law “a mess” during an appearance at Vanderbilt Law School in Nashville. He included the consent decrees that were put into place in 1941 to prevent ASCAP and BMI from gaining too much market power as part of the problem. “There’s been innovation and progress in the music business and the technology that delivers it, but the licensing of it is still governed by these consent decrees,” he said. “I think as public agencies we need to take a look and see if these consent decrees are still relevant in the marketplace.”
Delrahim’s comments before a group of law school students came just days after the DOJ allowed the deadline to appeal a federal court decision which struck down its new 100% “full work” music licensing requirement to pass without taking any action. That standing down allowed a December appeals court decision to stand, allowing performance rights organizations, such as ASCAP and BMI, to engage in the practice of what’s known as fractional licensing. That means any music user, such as a radio station, would need to first obtain licenses from all of the other copyright owners who own any fraction of the song’s rights—or face the risk of legal action. The net impact of the DOJ retreat is that radio stations will now be required to strike licensing deals with every performance rights organization in order to play a song without the fear of getting sued for copyright violations. That’s a prospect that some attorneys think is certain to increase how much broadcasters pay in music rights fees. The industry has already begun paying millions of dollars to new entrant Global Music Rights.
There are 1,300 consent decrees currently on the books at the Antitrust Division, and Delrahim revealed the DOJ has launched a review of all of them to determine whether they remain relevant. “If they have solved the competitive problem, they could become anticompetitive tools over time if they still exist,” he said. “We will begin sun-setting some of them that don’t make a lot of sense.” Delrahim said the DOJ has so far reviewed two-thirds of the consent decrees, but he offered no details about how many it will propose doing away with—or whether those that govern ASCAP and BMI have been found to still be valid. As Inside Radio reported in December, the DOJ had already been wavering on its role in music licensing.
But broadcasters are likely to dispute the allegation the consent decrees no longer have a role to play, especially since in recent years the courtroom setting has delivered decisions resulting in stations receiving refunds rather than paying higher rates. The prospect of going to rate court helped push ASCAP to strike a five-year agreement with the Radio Music License Committee in Dec. 2016 that paid songwriters slightly more while giving stations more flexibility on what sort of license they held. But the courtroom threat wasn’t enough for radio to ink a deal with BMI. After the RMLC was unable to strike a new deal with the performance rights organization when its last agreement expired, the two sides moved into rate court more than a year ago with stations paying an interim rate until a final deal covering the 2017-21 term can be reached.
Delrahim said as the government considers whether many of the consent decrees it oversees should go, he believes the DOJ should focus more on its role as an enforcement agency than that as a regulatory body. “When we start doing regulation by consent decrees that’s when we should know that we’ve done something wrong,” he said.
For now, the Radio Music License Committee and National Association of Broadcasters aren’t sounding any alarm, focusing instead on educating the DOJ about how important the consent decrees remain to radio and other music licensees. RMLC executive director Bill Velez said in an email that the trade groups and several music users have already been in contact with Delrahim and the DOJ staff to express their “collective concerns” about any inclination they may have to sunset the ASCAP/BMI decrees.