DOJ Antitrust Chief: We Are Reviewing ASCAP, BMI Consent Decrees

Says it's part of holistic review of decrees; expands on case for structural deal remedies
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U.S. Department of Justice

U.S. Department of Justice

Justice antitrust chief Makan Delrahim signaled this week that his division was taking a fresh look, and with a fairly critical eye, at the consent decrees under which performance royalty organizations (PROs) collect their fees.

That came in an appearance this week at Vanderbilt Law School, where he said reviewing consent decrees was one of his priorities coming into the job, the job being to oversee antitrust enforcement.

It won't be the first time Justice has looked at the PRO decrees still on the books. 

Delrahim signaled some of the 1,300 consent decrees on the books had clearly outlived their usefulness, particularly those outliving the industries they were meant to circumscribe, including piano rolls and buggy whips. 

A tad closer to home and this century, he cited some that were still “relevant to our everyday lives" that DOJ was reviewing, including the 1948 Paramount consent decrees that govern how movies are distributed (that was the decree that studios had to divest their co-owned theater chains, which led to the breakup of the old studio system of end-to-end control of the supply chain).  

But he pointed particularly to the ASCAP and BMI music licensing consent decrees that also date from most of a century ago, and have also been the subject of recent litigation, which Delrahim also cited as good background on the issue. 

"The way music is licensed has been governed by these consent decrees since 1941,” he said. “So, 77 years of a consent decree, rates being set by a judge in rate court as opposed to free market competition [which he favors] and we are taking a look at that. 

He referenced the recent Pandora v. ASCAP decision and recommended it to anyone interested in music or antitrust law. 

He said that music has innovated from bandstands to streaming, while the licensing and ownership of music is still governed by those 77-year-old consent decrees. 

DOJ Sues to Block AT&T-Time Warner 

He said it was incumbent upon the government to dig down. "As public agencies we need to take a look and see if those consent decrees are still relevant in the marketplace," which he was clearly signaling was up for debate. "If they have solved the competitive problem," he said, "they could become anticompetitive tools over time if they were not necessarily the best ideas at the time, it doesn't make a whole lot of sense for them to stay." 

He said they had so far reviewed two-thirds of some 1,300 consent decrees. 

Delrahim is clearly looking to prune back the consent decrees in antitrust cases, some of them almost a hundred years old. He is not so keen on new ones, either, choosing not to impose behavioral conditions on the proposed AT&T-Time Warner Cable merger but instead to sue to block the deal when AT&T wouldn't spin off assets to secure Justice approval. 

In a speech last November, in advance of filing suit against the AT&T-Time Warner deal, Delrahim laid out a case for preferring fixing the market via structural moves--getting (say, an AT&T to divest Turner assets in the Time Warner deal--rather than essentially trying to fix an illegal deal with conditions that had to be monitored. Delrahim suggested in that November speech that behavioral conditions are too tough to craft and enforce. "[H]ow can antitrust lawyers hope to write rules that distort competitive incentives just enough to undo the damage done by a merger, for years to come? I don’t think I’m smart enough to do that." 

He continued making that case in the Vanderbilt appearance, saying that crafting such consent decrees substitutes DOJ's judgment for the marketplace, and turns it into a micromanager or a mini-regulator. He said his role is as a law enforcer. 

"Consent decrees are meant to be a settlement of a violation...You try to fix the market and then let the market decide who wins and who loses." 

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