You shouldn’t have to be a trained economist to know that a significant percentage of America’s small businesses are on life support right now and need the government to help them get back on their feet. The restaurant industry has already lost $120 billion from the pandemic, with a recent Yelp Economic Impact Report finding that the virus forced 53-percent of affiliated restaurants to close permanently. Retailers aren’t in any better shape. Forrester Research found that 42-percent of consumers don’t even plan on re-entering store premises when the government allows them to. With plummeting sponsorship revenue, the radio industry is also on track to lose billions as many local stations continue fighting to remain afloat.
And yet, as Congress continues working on a fourth economic relief package to help mitigate the pandemic’s damage, the Justice Department is busy considering policy changes that will enrich a politically well-connected music industry cartel at these businesses’ expense.
At issue are antitrust agreements, known as consent decrees, which prevent a music duopoly – the American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music Inc. (BMI) – from using their monopoly power to advance a predatory, anti-competitive agenda.
By way of background, restaurants, radio stations, retail stores, hotels, coffee shops, bars (virtually any business where music is played publicly) must pay a licensing fee to ASCAP and BMI, a powerful industry force that gained control of 90-percent of the performing rights marketplace by way of collusion between music publishers.
Collusive price-gouging is of course illegal under antitrust law, so to ensure that these Main Street businesses aren’t extorted and forced to pay above-market rates, ASCAP and BMI signed consent decrees with the Justice Department. These agreements prevented a forced break-up of these cartels by stipulating that they license all their songs through a fairly-priced, single license to any business that requests one. This license availability, along with the requirement that ASCAP and BMI treat similar businesses the same, prevents them from using their monopoly power to price gouge or hold start ups hostage. For decades, they have allowed companies to receive the rights they need without worrying about being shaken down by the music mafia.
But forget for a minute that these decrees have worked tremendously well, and have made America’s music industry the envy of the world. Forget for a minute that price-gouging is still illegal, or that we’re in the middle of a pandemic, where the entities dependent upon these decrees are already holding on for dear life as it is. While these facts matter, the music mafia’s influence over Washington has ostensibly caused some in the Justice Department to ignore the unprecedented crisis facing American businesses. In response to lobbying pressure, they even seem open to loosening ASCAP and BMI’s shackles now, at the worst possible time for our nation’s economy.
Last year, at ASCAP and BMI’s urging, the DoJ turned heads by opening a review of their decrees for possible changes or termination – despite a recent large fine against ASCAP for continued anti-competitive behavior. And, just a few days ago, the Department’s Antitrust Division shocked the reeling business community when it announced that later this month it would hold a series of hearings over two days to explore whether it should modify the agreements or remove them altogether. Maybe the DoJ’s motives are pure. Maybe the Department’s good guys are trying to use this event to close this case and leave these competitive protections in place, just as the Department has done previously. But let’s make one thing clear: if the Antitrust Division’s decides to aid and abet these organizations’ predatory behavior, especially during a time of economic crisis, it would represent the height of bureaucratic cronyism.
While some in the Department may feign ignorance, they all should understand just how dangerous and superfluous the current consent decree review process is. Just four years ago, one of the two cartel creatures had to pay a near-$2 million fine to the DoJ “to settle allegations that [it] violated a court-ordered consent decree” to hose small businesses. Months later, Justice even completed a thorough review of the decrees, finding that “the industry has developed in the context of, and in reliance on, these consent decrees and that they therefore should remain in place.” Nothing has changed from four years ago to now, and their propensity to abuse the marketplace remains as clear as day.
Unshackling ASCAP and BMI might make the top executives at the big music publishing houses a bit richer. But they will make this new money off the backs of vulnerable businesses that are already struggling to survive as it is. The hidden tax it would impose will cause significant, and – in some cases – irreparable operational harm to department stores, restaurants, radio stations, and all establishments that play music.
This flirtation with enriching the music cartel is being driven within the Antitrust Division. Still, it’s Attorney General Barr’s department at the end of the day, and he can make the final call. Barr has been vocal about the corruption and predatory behavior of bad actors in the entertainment industry, and he knows the struggles that honest actors in the economy face today. I am optimistic that he will intercede as needed to stop this policy disaster that would be a bad idea in the best of times. The nation’s businesses are counting on it.