A group of television station owners has filed a class-action antitrust lawsuit against SESAC and its affiliated composers and music publishers. SESAC is a for-profit company that licenses public performance rights to copyrighted music compositions. The complaint (“Complaint”) filed in a United States District Court in New York alleges that SESAC has engaged in anti-competitive behavior in violation of federal antitrust laws.
The Complaint asks the court “to restrain and prevent SESAC from perpetuating the unlawful exercise of the monopoly power SESAC has amassed, unilaterally and collectively in conspiracy with and among SESAC [copyright holders], . . . over the licensing to Plaintiffs and other Class Members of the music performance rights they need to broadcast their scheduled programming.” In layman’s terms, the television broadcasters have asked the court to force SESAC to stop its anti-competitive conduct with respect to licensing SESAC public performance rights that are embedded in network and syndicated television programming. The Complaint also seeks treble money damages from SESAC for its alleged violations.
As mentioned above, the lawsuit was filed as a class action, which means that the named plaintiffs are proceeding on behalf of themselves and other members of a particular class—the class in this case is identified generally as local commercial television broadcasters. If the judge certifies that the case should proceed as a class action, other television broadcasters will be given an opportunity to participate as members of the class and, thus, to be bound by the outcome of the case. For example, if the court awards monetary damages to the plaintiffs, then participants in the class should also be entitled to some portion of that award. As of November 18, 2009, the judge has not yet certified the class. (Assuming the court certifies the class, procedures to notify local commercial television broadcasters and the methods by which class members may choose to or decline to participate in the lawsuit will be ordered by the court.)
Three entities offer music performance rights licenses for virtually all music broadcast by local television stations—ASCAP, BMI, and SESAC. Local stations must acquire licenses from each of these organizations because their repertories are exclusive of one another. For decades, ASCAP and BMI have been operating under consent decrees following the U.S. Department of Justice’s investigation into alleged antitrust violations by those two entities (“Consent Decrees”). SESAC is not a party to the Consent Decrees and not bound by their terms. According to the Complaint, “SESAC flaunts its freedom from the competitive safeguards afforded by the Consent Decrees and has clearly demonstrated its intention to take full advantage of its monopoly power by engaging in many of the very same practices that ASCAP and BMI were barred from continuing . . . .”
One of two key factual allegations made in the Complaint is that SESAC has taken anti-competitive actions that are “exactly the type of conduct” prohibited by the ASCAP and BMI Consent Decrees and cause the same anti-competitive effects against which the Consent Decrees were designed to protect. Specifically, the lawsuit claims that SESAC has:
- Refused to offer broadcasters an economically viable alternative to its all-or-nothing blanket license and is not required to do so.
- Purported to offer a per program license alternative to its blanket license, but the terms are “so egregious” that the offer is meaningless.
- Enhanced the “competition-foreclosing power” of its blanket license by serving as the exclusive licensing agent for its rights holders for many compositions in its repertory.
- Threatened to withhold access to its entire repertory as a means to extract “supracompetitive” fees from broadcasters.
- Strategically raided ASCAP and BMI to entice composers whose compositions either are embedded in established syndicated and unlicensed network programming, are widely incorporated in broadcasters’ locally produced programs, or are included in enough commercials that it would be essentially impossible for broadcasters to avoid the compositions.
- Unfairly refused to disclose accurately the full contents of its repertory, making it impossible to avoid using SESAC music.
- Coordinated with its affiliated rights holders an anticompetitive scheme to aggregate compositions from hundreds of different sources into a single repertory.
The Complaint also alleges that SESAC’s scheme to restrain trade and eliminate price competition has had “actual injurious effects” on television broadcasters. For example, the lawsuit points out that from 2005 to 2007 SESAC offered stations a per program license fee. The terms of the license for that period were set by an independent panel of arbitrators following a lengthy arbitration proceeding. According to the Complaint, more than 250 local stations chose to operate under this lower cost, per program structure rather than the blanket license structure. However, following the expiration of the 2005-2007 license period, SESAC changed the terms of the per program license. Under the 2005-2007 agreement, only five percent of certain kinds of third-party programming was deemed to contain SESAC music (on which royalties were due); after the 2005-2007 agreement expired, SESAC deemed that 50 percent of such programming would be deemed to contain SESAC music—greatly increasing the fees due from broadcasters to SESAC.
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