Justice Department Backs Price-Fixing Claim Against Nation's Radio Stations

Irving Azoff - H Getty 2016
Matt Winkelmeyer/Gettyimages

To paraphrase Britney Spears, oops, the DOJ did it again. As the nation is consumed by impeachment drama, the Department of Justice has become perhaps historically aggressive in meddling into the competitive affairs of the entertainment industry.  In recent weeks, the nation's chief antitrust enforcer has moved to rip up the decades-old rules that have governed the relationship between film distributors and theatrical exhibitors, weighed in on the ongoing dispute between Hollywood's agents and writers and now, thrown a figurative stick of dynamite in a lawsuit concerning songs played on the radio.

The lawsuit involves two main players, but really, there's something at stake for pretty much everyone across entertainment.

The first player is Global Music Rights, an upstart performance rights organization founded by Irving Azoff. This entity is not hamstrung by old consent decrees that require its competitors ASCAP and BMI to offer blanket licenses upon request. And so, after promising to score better royalties for clients, GMR now controls a small-but-important repertoire of works, including those by John Lennon, Prince, Jon Bon Jovi and Pharrell Williams.

The other is the Radio Music License Committee, which represents some 10,000 radio stations throughout the nation. Collectively, these stations account for about 90 percent of country's terrestrial radio revenue.

RMLC and GMR have failed to come to a licensing agreement, which has led to dueling antitrust claims. The radio stations allege that GMR is an "unlawful monopolist" demanding "supra-competitive" prices for licenses. GMR accuses the RMLC of operating an illegal cartel attempting to artificially depress the license fees that member stations pay to air music on the radio.

On Thursday, the United States filed a statement of interest that backs GMR's claim that the radio stations are engaged in a price-fixing conspiracy.

Perhaps the most significant aspect of the statement (read here) is the view that the radio stations may be engaged in a restraint of trade that is per se illegal, meaning the court wouldn't need to study the reasonableness of the restraint or assess the pro-competitive aspects of the restraint under the so-called rule of reason. As DOJ lawyers write, the RMLC is attempting to frame GMR's allegations as a "group boycott" claim — that is, the radio stations are collectively spurning GMR — instead of price-fixing.

"The two categories of restraints—price fixing and group boycott— are not, however, mutually exclusive," states the DOJ's brief, later adding that an agreement among competitors can include both a refusal-to-deal component and price-fixing. "Accordingly, and contrary to RMLC’s suggestion otherwise, the agreement would be per se illegal because it would constitute a naked restraint among the competing buyers on price or quantity purchased."

The DOJ's statement also provides the view that the court needn't analyze the radio stations' intent to harm commerce nor assess whether the radio stations have been successful in achieving a fix on prices.

The government's move may signal something about its ongoing review of the ASCAP and BMI decrees. Many music users — television stations, digital services, etc. — are currently urging the DOJ to hold onto the rules that govern the licensing of public performance rights. If the DOJ is looking at the controversy between GMR and RMLC and has decided to respect GMR's free reign, it could be a sign that the government is nearing the conclusion that those rules are as outdated as the Paramount Consent Decrees.