Trump’s Justice Department should change its tune on antitrust policy

As a former associate deputy attorney general in the George H.W. Bush administration, serving under Attorney General William Barr, I see how the Antitrust Division could  positively resolve a developing controversy.

Just one day after The Hollywood Reporter published an article arguing that examining the regulations pertaining to music licensing may be one of the Trump Department of Justice’s (DOJ) top antitrust targets, the Antitrust Division on June 5 re-opened a review into the consent decrees with the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music Inc. (BMI).

From threats of impeachment and investigations embroiling Barr personally, to investigations into apparent intelligence agency misconduct, DOJ certainly has a lot on its plate. And yet, despite all these concerns, the Antitrust Division has re-opened a review of the ASCAP and BMI consent decrees from 1941, even though DOJ concluded one just three years ago, determining after a two-year review that they should not alter the decrees.

Review processes are rarely reopened this soon after closure. Such occurrences typically mean one thing — the peddling of misinformation from stakeholders who have a hard time taking no for an answer.

Given Barr’s track record cutting through talking points, and knowing the importance of the ASCAP and BMI consent decrees, I question that this is the work of current AG Barr, especially given everything else competing for his attention. DOJ’s statements on this issue have come from the Antitrust Division head, not the attorney general himself. But Barr has the opportunity to steer the process in the right direction so that performers and consumers of music do not suffer higher costs and fewer opportunities to succeed.

So, what exactly do ASCAP and BMI do, and why do they need to remain restrained?

Almost anyone who has attended law school has read the ASCAP and BMI case law and understands the consent decrees’ significance to the music marketplace. Professors across the political spectrum utilize them as hallmarks of the efficacy of U.S. antitrust law.

Consisting of music publishers, songwriters and composers, the two organizations boast vast membership that has given them control of 90 percent of the music licensing market. Consequently, any bar, club, store or performing arts center that wants to play or perform music on its premises must receive the licensing rights to do so through them.

Although they provide important market efficiencies, ASCAP and BMI use the non-existence of competition and market pressure in the government-created intellectual property industry to their advantage. There is nothing condemnable about this; the job of ASCAP and BMI is to look out for the needs of members, not the industry at large. That is supposed to be the responsibility of DOJ, which must use the Sherman and Clayton Antitrust Acts to ensure competition and innovation in government-created industries.

In 1941, that is what the Justice Department did. It put ASCAP and BMI under consent decrees, which are antitrust orders that, without forcing the institutions in question to admit wrongdoing, stipulate that they keep prices at reasonable rates or else face consequences. The decrees authorize blanket licenses for everything in the repertoires of ASCAP and BMI to any individual or business that requests them.   

In 2016, a DOJ review of the ASCAP and BMI consent decrees found that “the industry has developed in the context of, and in reliance on, these consent decrees and that they therefore should remain in place.” This was the right call, since ASCAP and BMI are just as massive and anti-competitive as they were in the 1940s.

To understand this, one needs only to look at the action DOJ has taken against their predatory behavior in recent years, even with the decrees in place. In one case, ASCAP even agreed to settle for $1.75 million to end further legal action by DOJ. If things are this bad today, intuition should lead anyone to believe that the Trump administration responding to the two monopolies’ calls to relax their antitrust agreements would only make things worse. And yet, that seems to be what the Antitrust Division may be planning to do.

Last year, Congress passed language in the Music Modernization Act (MMA) requiring that it remain apprised on future review processes before the DOJ makes a formal decision. This guidance from the House and Senate Judiciary Committees should go a long way toward ensuring that Barr’s department comes to the right decision.

Making the right call will mean everything to local musicians and the audiences and venues that host and listen to them. Although the royalty system for music overwhelmingly favors the top touring acts, by bringing music licensing pricing closer to market levels, the antitrust decrees protect the playing rights of up-and-coming musicians, who rely more heavily on the use of cover songs. Changing them considerably will cause even more venues to go bankrupt, opt to raise prices or stop supporting music because of the considerable costs. This will harm no one more than the performers and listeners of music themselves.

DOJ’s policy should be to ensure that fair markets exist in areas where the government’s footprint inherently breeds monopolies, such as the copyright industry. Failing to keep the consent decrees as they are will not only run a whole marketplace amuck; it also inevitably will lead to law professors across the country one day utilizing the music industry as a case study in the failures of government, rather than hailing it as a success story.

Peter Ferrara is an attorney and senior policy adviser to the National Tax Limitation Foundation, and teaches economics at King’s College in New York. He served in the White House Office of Policy Development under President Ronald Reagan and as associate deputy U.S. attorney general under President George H.W. Bush.