Court Accepts Claim of SESAC's Alleged Anticompetitive Behavior

 

By Glenn Peoples, Nashville
for Billboard

SESAC won two favorable rulings by a district court in Pennsylvania last week, but still faces a charge of anti-competitive conduct by the Radio Music License Committee, an organization that represents the commercial radio stations in licensing matters.

 

In the June 26th ruling, the court threw out claims against SESAC for price fixing and group boycott/refusal to deal. The price fixing complaint alleged SESAC had agreements with its affiliates that formed a "hub-and-spoke conspiracy." However, the court concluded the RMLC "failed to prove the rim of a hub-and-spoke conspiracy by failing to plausibly allege agreements among SESAC’s affiliates. As the judge noted in the decision, the Sherman Act prohibits monopolistic power only if it's acquired through anticompetitive conduct.

 

But the court refused to grant SESAC's motion to dismiss a charge of anticompetitive behavior. The RMLC alleged SESAC has increased its prices 8% to 20% each year since 2009 without an increase in the size or popularity of its repertory. Unlike ASCAP and BMI, SESAC does not operate under a consent decree with the Department of Justice. As a result, SESAC licensees are not able to seek pricing relief in the rate court available to ASCAP and BMI licensees.

The court agreed with the RMLC's depiction of how SESAC obtained monopoly power through exclusionary conduct rather than "growth or development as a consequence of a superior product, business acumen, or historical accident." Instead, alleged the RMLC, SESAC obtained a "critical mass of must-have works," sold them exclusively in blanket licenses, discouraged direct licenses through rights withdrawals and obscured works in its catalog.

 

Writing about obscured works in SESAC's catalog, the court believed RMLC had adequately pleaded that SESAC's lack of transparency "exacerbates the exclusionary nature of its conduct by forcing radio stations to purchase the SESAC license even if they do not plan to perform the songs in SESAC's repertory for fear that they may unwittingly air copyrighted content.

 

The way SESAC sets prices continues unchanged while the case works its way through court. In December the court denied the RMLC's request to impose an injunction against SESAC rate hikes while the lawsuit plays out.