Mergers & Antitrust Law News

Music Consent Decrees Give Unfair Boost to Tech Giants, DOJ Told

July 28, 2020, 8:24 PM

A pair of Justice Department settlements that govern how musicians are paid royalties has given technology giants like Apple Inc. and Amazon.com Inc. more power by protecting them during negotiations with performing rights organizations, several music industry executives and artist LeAnn Rimes said.

The DOJ’s antitrust division Tuesday brought together Rimes and the heads of the nation’s top music publishing rights organizations to discuss whether the government should consider undoing nearly 80-year-old consent decrees with the American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music Inc. (BMI). The decrees require them to license music to public venues on equal terms, set by a federal court.

The decrees, which date back to 1941, govern how music royalty payments are collected by ASCAP and BMI, both of which represent songwriters. Neither decree has an expiration date.

That’s left both ASCAP and BMI hamstrung when trying to negotiate royalties with tech companies, which don’t face similar restrictions when advocating for their ability to play music on their streaming platforms, speakers said during the DOJ’s virtual conference.

“Facebook, Apple, Amazon, Google they are smart, savvy, and all lawyered up and widely unregulated,” said ASCAP CEO Elizabeth Matthews. “I have yet to sit in a negotiation with one of these licensees and not feel that songwriters’ hands were tied behind their backs due to the consent decrees,” she said.

“It’s crazy to think in 2020 songwriters are more regulated than Facebook,” she said.

The American songwriter is “one of the most government controlled professions in American history,” Rimes said during the two-day virtual event. The ASCAP and BMI consent decrees have given tech giants “special treatment” in music licensing, she said.

Two-Year Review

The DOJ’s antitrust chief, Makan Delrahim, has been reviewing the consent decrees since 2018. The changing dynamics of the industry, including the rise of streaming music services, warrants a review of the 1940’s-era settlements, he said.

Without the decrees, it’s expected that songwriters could negotiate higher rates with streaming services, radio stations, and other parties.

A complete termination of the decrees has been opposed by numerous lawmakers, including Rep. Jerrold Nadler (D-N.Y.) and former Rep. Tom Marino (R-Pa.), who fear a rollback would raise fees for public venues that play songs.

Both ASCAP and BMI have proposed alternative rules that would allow them to collect payments on what they say are fairer terms.

David Israelite, president and CEO of the trade association National Music Publishers’ Association, suggested a modification of the decrees rather than a termination.

Song publishers should be able to selectively withdraw their rights from ASCAP and BMI so they can negotiate directly with music licensees like streaming platforms, he said during the DOJ event.

“Major global technology companies that operate music streaming services such as Amazon and Apple hide behind the consent decrees, which are not designed to protect them, to avoid negotiating in a free market what they pay for music,” Israelite said.

To contact the reporter on this story: Victoria Graham in Washington at vgraham@bloomberglaw.com

To contact the editors responsible for this story: Laura D. Francis at lfrancis@bloomberglaw.com; Roger Yu at ryu@bloomberglaw.com

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