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Thursday, May 12, 2016

Justice Department Settles Civil Contempt Claim against ASCAP for Entering into 150 Exclusive Contracts with Songwriters and Music Publishers

ASCAP to Pay $1.75 Million and Reform its Licensing Practices

The Department of Justice announced today that the American Society of Composers, Authors and Publishers (ASCAP) has agreed to pay $1.75 million and reform certain practices to settle allegations that ASCAP violated a court-ordered consent decree designed to prevent anticompetitive effects arising from its collective licensing of music performance rights.  Despite provisions in that court order prohibiting ASCAP from interfering with its members’ ability to directly license their songs, ASCAP entered into approximately 150 contracts with songwriter and publisher members that made ASCAP the exclusive licensor of their performance rights.  As part of the settlement, ASCAP has also promised not to enter into further exclusive contracts and agreed to reform its licensing practices to remove music publishers from overseeing ASCAP’s licensing.

The Department of Justice’s Antitrust Division today filed a petition in the U.S. District Court for the Southern District of New York to have ASCAP held in civil contempt for violating the consent decree.  At the same time, the department filed a proposed settlement agreement and order that, if approved by the court, would resolve the department’s concerns.

“By blocking members’ ability to license their songs themselves, ASCAP undermined a critical protection of competition contained in the consent decree,” said Principal Deputy Assistant Attorney General Renata B. Hesse, head of the Justice Department’s Antitrust Division.  “The Supreme Court said that ASCAP’s consent decree is supposed to provide music users with a ‘real choice’ in how they can access the millions of songs in ASCAP’s repertory – through ASCAP’s blanket license or through direct negotiations with individual songwriters and publishers.  Today’s settlement restores that choice and thereby promotes competition among the songwriters, the publishers and ASCAP.  This settlement also sends an important message to ASCAP and others subject to antitrust consent decrees that they must abide by the terms of the decrees or face significant consequences.” 

ASCAP is a performing rights organization that licenses public performance rights in compositions held by its hundreds of thousands of songwriter and publisher members.  Since 1941, when the United States originally brought a civil antitrust lawsuit against ASCAP for price fixing, ASCAP has been subject to a consent decree, amended twice since then, that imposes a number of restrictions on ASCAP designed to prevent its anticompetitive exercise of market power.  Among its restrictions, the consent decree prohibits ASCAP from entering into exclusive contracts with songwriters or music publishers or otherwise impeding direct licensing so that music users retain the ability to seek licenses directly from songwriters or music publishers. 

The department’s investigation into ASCAP’s decree violation also revealed the existence of a conflict in the interests of the music publishers that serve on ASCAP’s board of directors.  Those publisher board members are customers of ASCAP when ASCAP licenses their performance rights and competitors of ASCAP when they seek to license their rights directly.  To ensure that this conflict does not prevent ASCAP and its publisher board members from competing with each other in licensing, ASCAP has agreed in the proposed settlement to cease publisher board members’ involvement in ASCAP’s licensing activities. 

The proposed settlement also requires ASCAP to adopt an improved compliance program in order to minimize the likelihood of future consent decree violations.

ASCAP Declaration

ASCAP Declaration Exhibit A

ASCAP Declaration Exhibit B

ASCAP Memorandum

ASCAP Proposed Order

ASCAP Petition

16-564
Topic: 
Antitrust
Updated December 30, 2016