Antitrust Law Daily Dueling lawsuits from music rights licensing organizations move forward
Tuesday, February 18, 2020

Dueling lawsuits from music rights licensing organizations move forward

By Peter Reap, J.D., LL.M.

Both of the suits allege violations of federal and California antitrust law and accuse the other organization of operating as an illegal cartel.

Defendant Radio Music License Committee’s (RMLC’s) motion for judgment on the pleadings in a lawsuit brought by Global Music Rights (GMR), a performing rights organization (PRO) alleging that RMLC violated the Sherman Act and California’s Cartwright Act and Unfair Competition Law was denied by the federal district court in Los Angeles. GMR alleged sufficient facts for each of its three claims, the court held, at the same time granting National Association of Broadcasters (NAB) leave to file an amicus curiae brief in the case. Also, in a suit brought by RMLC against GMR, alleging violations of the same three statutes, the court denied GMR’s motion to dismiss for lack of subject matter jurisdiction and failure to state a claim (Global Music Rights, LLC v. Radio Music License Committee, Inc., February 13, 2020, Hatter, T.).

GMR is a PRO that aggregates the public-performance rights of its affiliated songwriters and sells licenses bundling together those rights. RMLC is an entity that negotiates with PROs for public-performance licenses on behalf of the vast majority of radio stations. GMR and RMLC each allege that the other is an illegal cartel.

GMR’s suit against RMLC. RMLC violated the Sherman Act, the California Cartwright Act, and the California Unfair Competition Law when it conspired to force GMR to submit to a mandatory licensing scheme that artificially depressed license fees, according to GMR’s complaint. In its current ruling, the court held that GMR alleged sufficient facts for each of its three claims, and granted NAB leave to file an amicus curiae brief.

The complaint stated that RMLC is a cartel of radio stations that negotiates public-performance-right license fees with PROs for the benefits of its members and the commercial radio industry (approximately 10,000 radio stations). It alleged that the RMLC is an illegal cartel because, although being competitors, its member stations create and actively participate in a committee whose purpose is to negotiate with PROs as a group and destroy competition among them in the acquisition of performance license rates.

The complaint also stated that the GMR, a boutique PRO that represents a select group of music copyright owners, entered into performance license negotiations with RMLC. During the negotiations, RMLC made a rate proposal for a single fee covering a blanket license for all RMLC radio stations for one year. GMR offered several proposals in response, all of which were rejected. GMR subsequently tried to enter into direct licenses with individual members of the RMLC with almost no success. GMR’s then tried to try to negotiate with RMLC again but found its offer to be exploitive and rejected it.

The complaint alleged that RMLC’s member radio stations are "horizontal competitors" and are acting as an illegal cartel to keep payments to songwriters artificially low. It also alleged that the activities of the RMLC and its members and co-conspirators are within the flow of, and have substantially affected, interstate trade and commerce. It further alleged that the RMLC member stations have engaged in anticompetitive conduct in furtherance of their conspiracy, and that the anticompetitive effects of their conduct in the market are not outweighed by, or necessary to achieve, a pro-competitive purpose.

Justice Department weighs in. Focusing on RMLC’s motion for judgment on the pleadings with respect to GMR’s per se price fixing claim, the Department of Justice Antitrust Division argued in a December 5 statement of interest that buyers’ cartels can be as equally destructive of competition as more commonly identified sellers’ cartels and suggests that RMLC’s arguments misstate the law on buyers’ price fixing agreements and should be rejected.

RMLC’s suit against GMR. In its ruling in this case, the court struck RMLC’s prayer for relief seeking a method to help it obtain monetary relief, if applicable. Associational standing is not appropriate in actions seeking monetary relief where the monetary relief would require individualized proof, the court noted. Although RMLC argued that it did not seek restitution or disgorgement of profits, but rather a method to help it obtain monetary relief, if applicable, that court concluded that was a distinction without a difference.

However, the court rejected GMR’s argument that the complaint should be dismissed for failure to state any of its claims. RMLC alleged sufficient facts to state a claim for each of its three claims, the court held.

The cases are No. 2:16-cv-09051-TJH-AS and No. 2:19-cv-03957-TJH-AS.

Attorneys: David Marroso (O'Melveny & Myers LLP) for Global Music Rights, LLC. Alfred C. Pfeiffer, Jr. (Latham and Watkins LLP) for Radio Music License Committee, Inc.

Companies: Global Music Rights, LLC; Radio Music License Committee, Inc.

MainStory: TopStory Antitrust CaliforniaNews

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