9:16am PT by Eriq Gardner
ASCAP Pays $1.75 Million to Settle Justice Department Probe
As the Justice Department continues to review a 75-year-old consent decree that rules over the public performance of song compositions, it announced Thursday that licensor ASCAP has agreed to changes to resolve an investigation into whether the performing rights organization was violating the old consent decree. Additionally, ASCAP will be making a $1.75 million payment, although it is not admitting any wrongdoing.
The DOJ launched its probe in the midst of ASCAP's rate-setting proceeding with Pandora.
Pandora was entitled to this rate-setting proceeding thanks to a 1941 consent decree that settled an antitrust lawsuit brought by the government alleging monopolization of performance rights licenses. The consent decree requires a license for song performance rights be given whenever an outlet requests it, but song publishers attempted to withdraw new-media rights from ASCAP in order to negotiate directly with Pandora. That led to a court fight, and in 2013, U.S. District Judge Denise Cote determined that that the consent decree required Pandora be given a license to stream despite the move from ASCAP's publisher members.
Judge Cote's findings gained attention at the DOJ.
One of the issues that was investigated was coordination by ASCAP and its board members, mostly big publishers like Universal Music and Sony/ATV but also elected songwriters and composers, too.
To settle the concern that publishers have a conflict of interest and that this might inhibit strong competition in the licensing market, ASCAP has now agreed that its licensing negotiations will be done without consultation with its publisher board members. So, for example, the next time that ASCAP and Pandora are negotiating rates, Universal won't be in the information loop until the deal is signed.
Additionally, the DOJ was also concerned by word that ASCAP was giving advance payments to publishers in return for exclusive rights to license works. According to the DOJ, ASCAP entered into approximately 150 contracts with songwriter and publisher members with exclusivity clauses. This arguably is a violation of a consent decree that mandates that ASCAP take only non-exclusive grants, which allows publishers to cut direct deals with outlets like Pandora or Spotify if they so choose.
ASCAP has agreed to no longer insist on exclusivity. The rights organization says the exclusivity was never enforced and it had already made the change prior to the settlement by telling its publishers that it was backing away from exclusivity. But it's this activity that has caused ASCAP to agree to a $1.75 million settlement.
“By blocking members’ ability to license their songs themselves, ASCAP undermined a critical protection of competition contained in the consent decree,” said Renata 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.”
The deal between ASCAP and the DOJ — which also includes the adoption of an improved compliance program and will need to go to a judge for approval — moves the parties past a potential court fight at a time when performance rights organizations, including competitor BMI, are hopeful of broad changes to the consent decree that would allow more flexibility in the licensing market.
“Settling this matter was the right thing to do for our members,” said ASCAP CEO Elizabeth Matthews. “With these issues resolved, we continue our focus on leading the way towards a more efficient, effective and transparent music licensing system and advocating for key reforms to the laws that govern music creator compensation.”