Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Performance Right Licensing Agency Charged With Monopolizing Essential Repertory of Copyrighted Music, (Oct 15, 2012)

By John W. Arden, J.D., LLM.

SESAC—a privately-held, for-profit public performance right licensing agency—has “illegally monopolized an essential repertory of copyrighted music,” quashed all competition among its 23,000 copyright-holding affiliates, and used its monopoly to coerce the U.S. radio industry and other consumers into paying supracompetitive prices, according to a complaint filed by a radio industry music licensing organization in the federal district court in Philadelphia (Radio Music License Committee, Inc. v. SESAC, Inc., October 11, 2012).

Radio Music License Committee (RMLC), which represents thousands of commercial radio stations, filed the complaint on the heels of its settlements of long-standing lawsuits with major music rights licensors ASCAP (The American Society of Composers, Authors, and Publishers) and BMI (Broadcast Music, Inc.).

ASCAP and BMI are subject to consent decrees with the U.S. Department of Justice, which prevent monopoly pricing by permitting users to apply to federal court to resolve rate disputes, according to RMLC. However, SESAC has no such limits on its “monopoly pricing,” the organization charged.

The complaint alleges that SESAC ensures that it can charge monopoly prices by creating “an artificial bottleneck” to copyrighted musical works by: (1) strategically hand-picking its affiliates so that it has exclusive licensing authority over musical works that U.S. radio stations cannot reasonably avoid broadcasting, (2) threatening U.S. radio stations with hefty copyright infringement fines for broadcasting works in the SESAC repertory without a proper license, (3) obscuring the musical works within its repertory, making it impossible for broadcasters to determine whether a particular musical work falls within its repertory, (4) refusing to sell non-blanket licenses to radio stations, and (5) eliminating price competition between and among its and its affiliates.

Furthermore, SESAC can share its monopoly profits with its “cartel member affiliates,” who lack an incentive to abandon SESAC for performance rights organizations that are subject to consent decrees with the U.S. Justice Department.

Among the unlawful and anticompetitive activities alleged in the complaint are SESAC’s fixing of prices of musical compositions with its affiliates; entering into exclusive dealing contracts with its affiliates; and refusal to deal with RMLC members who wish to purchase music other than on a blanket basis.

Specifically, RMCL alleges horizontal price fixing in violation of Section 1 of the Sherman Act, group boycott and refusal to deal in violation of Section 1 of the Sherman Act, and monopolization in violation of Section 2 of the Sherman Act. The organization seeks mandatory injunctive relief—requiring SESAC to submit to a rate-making procedure comparable to the ASCAP and BMI consent decrees—and expenses and costs of suit, including attorneys’ fees.

“Resorting to litigation is never a first reflex for RMLC,” said Chairman Ed Christian, in an October 9 news release. “This legal process will undoubtedly prove to be taxing in terms of the amount of labor and expense involved. Yet, we feel that SESAC’s pattern of increasingly exorbitant rates imposed on our industry without resort to a fair process has left us with no other alternative.”

The complaint is Civil Action No. 2:12-cv-05807-CDJ.

Peter J. Mooney (White & Williams LLP) and Margaret M. Zwisler (Latham & Watkins LLP) for Radio Music License Committee, Inc.

News: Antitrust