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implications of pending music licensing proposals not only on music users, but on
the legitimate interests of music creators and copyright owners, domestically and
STATEMENT OF CHARLES F. (RICK) RULE
CONCERNING H.R. 789
BEFORE THE COMMITTEE ON SMALL BUSINESS
MAY 8, 1996
It is an honor and a privilege to be invited to
testify before this committee on H.R. 789, the Fairness in
Musical Licensing Act of 1995.
My name is Rick Rule, and I am
a partner at the law firm of Covington & Burling. Prior to joining the firm, I served in the Antitrust Division of the
Department of Justice from 1982 until 1989. From late 1986 until I left the Department, I was the Assistant Attorney General in charge of the Division. Among the responsibilities of that job is the enforcement of the consent decrees against
ASCAP and BMI, and, during my tenure, I had the "pleasure" of wrestling with various issues under those decrees.
I appear before the committee in what, for a lawyer,
is a somewhat unusual role I am representing no client. The views I express are my own and not those of my partners or our clients. Nevertheless, the Committee should note that on
behalf of our client, the National Football League, my partner
Neil Roman has submitted a statement for the record.
statement, the NFL makes the altogether sensible
recommendation that a bill such as H.R. 789 that purports to address fairness in musical licensing should be carefully
focused on non-dramatic musical works and should not (as H.R.
789 currently does) sweep other copyrighted works, such as
professional sports broadcasts, into an overly broad exception to copyright protection.
While I agree with the NFL's statement and the changes that it recommends to H.R. 789, I do not intend to
address that issue this morning.
Instead, I will try to
respond to the Committee's request for some background on the ASCAP and BMI consent decrees and on some of the antitrust and
copyright issues inherent in those decrees.
I will also
mention some of the ways other than legislation that
restaurant owners and others who feel aggrieved by the
licensing tactics of ASCAP and BMI might try to change or prohibit those practices. My own personal view is that, if it is determined that society is made worse off by the way in
which ASCAP and BMI deal with those small commercial
establishments that "incidentally" perform non-dramatic musical works (though it is not clear to me that society is),
then legislation is the preferable mode of solution.
Whether one loves or hates ASCAP and BMI, it is hard
to imagine an effective system of copyright protection for
musical compositions in this day and age without some
enforcement organization like them. From 1897, when the copyright law vested in the owner of a copyrighted work the exclusive right to perform the work for profit, until 1914, when a handful of composers formed ASCAP, composers had no
practical way to enforce their performance rights.
of negotiating individual agreements between the multitude of
copyright owners and the various venues (e.g., theaters, night
clubs, bandstands, and broadcasters) within which the works
might be performed was prohibitive. Moreover, it was simply impossible for each composer on his or her own to monitor all
the venues throughout the country in order to detect and deter
ASCAP filled the void, dramatically reducing the
transactions costs of licensing performance rights and
creating an efficient mechanism for policing infringement.
ASCAP provided blanket licenses to venues, granting them the
ability to perform any composition within ASCAP's catalog in
exchange for a single fee.
The venues could then perform a
chosen musical work without having to track down and negotiate
a license with the owner(s); copyright owners would not have
constantly to monitor licensed venues in order to detect
infringement; and the owners of the performed works would get
compensated even if they were unaware of the performance.
Nothing, of course, is perfect, and so it goes with While combining a vast number of compositions in a
single catalog and selling blanket licenses to that catalog is
an engineer's dream of efficiency, it is an antitrust lawyer's
nightmare of reduced competition.
To work, ASCAP essentially
must eliminate competition among independently copyrighted
By taking a blanket license, the performer of the
copyright forgoes his or her ability to play copyright owners
against one another in order to get the most competitive
In a very short time, ASCAP came to control a
monopoly share of copyrighted composition, and with that share
came the power to set the price of licenses with little if any
In the 1930s, radio broadcasters
like CBS, concerned largely about the lack of competition for
ASCAP, formed the rival licensing organization BMI.
various reasons, however, BMI failed to inject much
competition into the process.
Also during the 1930s, ASCAP (and shortly thereafter
BMI) became the target of antitrust.
In 1941, both ASCAP and
BMI entered into consent decrees regulating their licensing
In 1950, after, among other things, successful
private antitrust suits challenging the way in which ASCAP
licensed "synchronization" and performance rights to motion
picture producers and exhibitors, ASCAP and the Department
agreed to a completely modified decree. 1/
That decree, inter
alia, requires ASCAP to issue licenses, prohibits it from engaging in price discrimination, limits it to obtaining non
exclusive licenses from copyright holders, and provides a
mechanism through which a potential licensee may have the
court set a reasonable license fee.
BMI agreed to a new decree in 1966. Though the ASCAP and BMI decrees do differ in various respects, they tend to regulate the organizations' operations similarly.