Friday, January 17, 2014

Broadcast Music, Inc. v. Columbia Broadcasting System, Inc. case brief

Broadcast Music, Inc. v. Columbia Broadcasting System, Inc. case brief summary


BMI and ASCAP are non-profit organizations that hold non-exclusive rights to license works of their members (songwriters and composers) holding approximately 25% and 75% of the market respectively. CBS alleged that the blanket license offered by each (giving the unlimited right of broadcasters to perform any and all music owned by the members) was an illegal agreement to fix prices (although did not allege any agreement between BMI and ASCAP). 


The Court found that the per se rule was not applicable because the blanket license was not a naked restraint of trade, but was actually a new product in a different market.

Distinguishing Facts
  • The DOJ had actually investigated ASCAP and allowed it through a restrictive consent decree as of 1950. This indicates that the practice may have competitive virtue.
  • Integrating the sales and creating a license that allows “unplanned, rapid, and indemnified access to any and all” of the compositions with minimal transaction costs and concentrated enforcement mechanisms is vitally necessary.
  • “ASCAP is not really a joint sales agency…but is a separate seller offering its blanket license, of which the individual compositions are raw material. [It] made a market in which individual composers are inherently unable to compete fully effectively.”
  • Remanded and found pro-competitive under the rule of reason.
Legal Considerations
  • Per se price fixing” is a legal category and “it is only after considerable experience with certain business relationships that courts classify them as per se violations;”
  • Footnote 27: Not a “naked restraint of trade.”
  • Footnote 33: Per se rule not employed until considerable experience.
  • The practice must be one that always or almost always tends to restrict competition and decrease output to fall under a per se rule.
  • This blanket license is probably a de-facto exclusive license, since the individuals have no reason to take less than the joint ventures would pay them as royalties (making getting individual licenses more costly). There is also no particular incentive for individual composers to engage in the transaction costs of dealing with CBS. Consequently, this may be more anti-competitive in practice than in theory.
  • This makes coordination easy that would be otherwise
  • Baker suggests that the Court is in effect adding a third element to the test for price fixing—requiring that there be no plausible efficiency justification for the practice—although this is not doctrine, just Baker’s analysis.

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