ASCAP and BMI consent decrees: Review ends and struggles begin

By Martin Miernicki

On 4 August 2016, the U.S. Department of Justice (DOJ) announced the conclusion of its review of the consent decrees applicable to the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI). The authority decided not to propose any modifications to the decrees. Furthermore, it set forth its (controversial) opinion that said decrees require ASCAP and BMI to offer “full work” licenses.[1]

 

Background

ASCAP and BMI are the most important performance rights organizations (PROs) for the management of performance rights in musical works in the United States and have for several decades operated under consent decrees negotiated with the DOJ. The organizations entered into these decrees due to claims based on antitrust violations of the Sherman Act. The current versions of the consent decrees date from 2001 (ASCAP) and 1994 (BMI). In 2014, the DOJ’s Antitrust Division initiated a review in order to evaluate if these decrees needed to be updated. In the course of this review, numerous public comments were submitted to the DOJ.

 

The closing statement

In a closing statement, the DOJ explained its reasons for not modifying the decrees and prohibiting ASCAP and BMI from issueing “fractional licenses”. With regard to the update of the decrees, the DOJ stated that “the industry has developed in the context of, and in reliance on, these consent decrees and that they therefore should remain in place” (page 22). However, it also suggested the need for comprehensive legislative reform. As for “fractional” licenses, the Antitrust Division interprets the language of the decrees and the case law based thereon as requiring PROs to provide access to “all works” in their repertoire, meaning that a license issued by such entity must eliminate the risk of infringement liability for the user. Thus, ASCAP and BMI may only i) offer licenses to the entire works, even if they represent not all co-owners; ii) include in their repertoires only works which they are able to license on such a basis.[2] Similarly, an amendment to the decrees to allow fractional licensing was found to be not in the interest of the public.

 

What can be expected?

The closing statement is in conflict with long-standing practices of copyright licensing in the United States. If enforced, it is likely to have a major impact on the music industry. It has also triggered a heated debate. The concerns expressed include the rise of administrative costs, a reduced royalty flow to right holders, and obstacles to creative production. Both ASCAP and BMI have announced that they will challenge the authority’s reading of the consent decrees; ASCAP aims to induce a legislative reform while BMI plans to pursue litigation.

[1] Under a “full work“ license (or 100 percent license), a user obtains authorization to use a work without risk of infringement liability, whereas a “fractional” license covers only the rights which are controlled by the PRO issuing the license, implying the need for further licenses.

[2] Under U.S. copyright law co-owners of joint works are treated as tenants in common. Thus, each co-owner can issue a non-exclusive license to the entire work (unless an agreement stipulates otherwise), provided that she accounts for and pays to the other co-owners their pro-rata shares of the revenues.

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