Protecting Utah’s small businesses against “Big Music”

by Gordon Jones

Now here’s an issue that has me seriously conflicted. On the one hand, I hate background music. I hate it in restaurants; I hate it in supermarkets; I hate it at the dentist’s office. What’s more, I doubt that I am alone. I have yet to have a friend invite me to Olive Garden to listen to the music, and incidentally to pig out on breadsticks.

On the other hand, I hate Big Music, the duopoly of ASCAP and BMI that licenses and controls all that background music, and so much else. ASCAP is the American Society of Composers, Artists, and Performers, and BMI stands for Broadcast Music Incorporated. Between them, they control the broadcast rights to nearly all the music produced (or ever produced) in the United States. Composers and artists trust these two to collect royalties from consumers of their music and send them along. Judging from the complaints from the artists, that side of the business doesn’t work all that well, but that’s a column for another day. Today we want to examine the effect of a duopoly in the real world, and particularly on the small businesses that want to assault your eardrums while your teeth or shopping cart are being filled.

To play that music, your dentist or grocer or other small business must purchase what are called “blanket” authorizations from ASCAP and BMI, two institutions that license approximately 90 percent of all the songs ever written in America. They didn’t attain this market share because they are better or more efficient than anyone else; they got it because of government copyright laws.

Since G. Warren Nutter destroyed the Rooseveltian bias against bigness in the 1950s, market conservatives have recognized that monopolies can only charge monopoly rents when they are supported by government power. Thus U.S. Steel, tho it enjoyed a huge market share, actually lowered consumer costs by over 50%, relying on small margins on increased sales to satisfied customers. On the other hand, Utah’s electricity company, Rocky Mountain Power, works with the government to maintain monopoly powers which limit choice and innovation.

So if market share is not (or at least not necessarily) the problem, what is going on with elevator music, and what should be done about it? Since the 1940s, consumers of the ASCAP/BMI product have been protected by federal antitrust consent decrees. These are agreements between ASCAP and BMI and the Justice Department that require the Performance Rights Organizations (PROs) to provide blanket licenses encompassing their entire repositories at fair market rates, with dispute resolution coming from a rate court. Thru this mechanism, the DOJ has functioned much like a public utility regulator.

These federal agreements haven’t solved every issue associated with PROs. Cafés, bars, and restaurants in Utah and elsewhere can still be subjected to unreasonable add-on fees, abusive rate-collecting tactics, and lawsuits that put them on the brink of bankruptcy for honest mistakes. Still, the consent decrees protect many of these businesses by balancing the need to respect copyright laws with the need to maintain market pricing.

Now, however, the fate of these important market protections has become uncertain. The Trump Administration is currently reviewing all the United States antitrust consent decrees (there are over 1,300 of them), and it appears that those restraining ASCAP and BMI are at the forefront of its review efforts. The Antitrust Division has signaled several times, including in a June speech by Assistant Attorney General Makal Delrahim to the Music Publishers Association conference, that the PRO decrees are under close examination. Making the wrong decision can lead to serious consequences for coffee shops, restaurants, and bars in Utah and the country at large.

Mike Lee to the rescue? There is one person in Congress that can make a night-and-day difference to the outlook of these important small business protections. That person is Utah’s Senator Mike Lee, who chairs the Antitrust Subcommittee of the Senate Judiciary Committee. Lee possesses a bipartisan, pro-consumer antitrust agenda that has already gotten into the down-and-dirty details of the ASCAP and BMI situation since his arrival in the Senate.

Three years ago, Sen. Lee conducted a hearing that heard both sides of this contentious issue. He then monitored the Obama Justice Department decision to keep the PRO consent decrees unchanged and, through a statement, commended the DOJ for its exhaustive review.

In the coming weeks, as Justice takes another look at these decrees, Sen. Lee has the unique ability to implement his thoughtful, apolitical antitrust philosophy in a case of great importance to small businesses throughout the State of Utah. It is clear that the DOJ review offers a significant opportunity to the PROs to re-open the consent decrees, giving the Big Music duopoly unprecedented opportunities to siphon off more revenue from burger joints, restaurants, and bars in Utah and across the country.

Under direction from Congress, the Justice Department must now “communicate and consult with Congress” on the music monopoly issue, so now is the time for Sen. Lee to hold a follow-up hearing – or, at the very least, refresh the Justice Department’s memory on what his last one demonstrated.

The reason the PRO consent decrees have lasted for 77 years is that for generations, Republicans and Democrats have risen above partisan politics to recognize their importance in the marketplace. For the sake of small businesses in Utah and across the country, Congress and the White House must continue to rise above the soundbites and chatter today so they can come to the same conclusion. The bottom lines of some establishments depend on it.

Sen. Lee has long argued that “antitrust law is and should be a nonpartisan issue;” one “that is neither liberal nor conservative.” Fair enough, but it is in the nature of regulators to regulate, whether or not there is a need for it. Possibly it was not the consent decree that led to the demise of the Horseshoers National Protective Association, but I wouldn’t be surprised.

From his position on the Judiciary Committee, Lee has an obligation to regulate the regulators, keeping their expansive tendencies in check, while assuring maximum protection for consumers of background music.

Even if I hate it.

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