Broadcast Music, Inc. v. Columbia Broadcasting System, Inc.
60 L. Ed. 2d 1, 99 S. Ct. 1551 (1979)
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Rule of Law:
The issuance of a blanket license by performing rights organizations, which sets a single price for access to a vast repertory of copyrighted works, is not a per se price-fixing violation of the Sherman Act and should instead be evaluated under the rule of reason.
Facts:
- Columbia Broadcasting System, Inc. (CBS) operates a national television network and is a major user of copyrighted music in its programming.
- American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI) are performing rights organizations that serve as licensing clearinghouses for thousands of individual copyright owners.
- ASCAP and BMI's members grant them nonexclusive rights to license their compositions, meaning members can also license their works directly to users.
- The primary licensing method used by ASCAP and BMI is the 'blanket license,' which grants a user the right to perform any composition in their repertory for a set term, typically for a fee based on a percentage of revenue or a flat amount.
- For decades prior to this litigation, CBS had continuously held blanket licenses from both ASCAP and BMI for its television network.
- CBS had never attempted to obtain licenses directly from individual copyright owners or to secure any other type of license from ASCAP or BMI before filing its lawsuit.
- The market structure, involving thousands of copyright owners and users, made individual negotiations for each music performance impractical for most users, leading to the creation of ASCAP and the blanket license model.
Procedural Posture:
- Columbia Broadcasting System, Inc. (CBS) filed a lawsuit against the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI) in the U.S. District Court for the Southern District of New York.
- CBS alleged violations of the Sherman Act, arguing the blanket license constituted per se illegal price fixing, an unlawful tying arrangement, and monopolization.
- After an eight-week trial limited to liability, the District Court dismissed the complaint, ruling that the blanket license was not a per se violation and, under the rule of reason, was not an unreasonable restraint of trade because direct licensing was a feasible alternative.
- CBS, as appellant, appealed the decision to the U.S. Court of Appeals for the Second Circuit.
- The Court of Appeals reversed, holding that the blanket license was a form of price fixing that was illegal per se under the Sherman Act.
- ASCAP and BMI, as petitioners, petitioned for and were granted a writ of certiorari by the U.S. Supreme Court.
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Issue:
Does the issuance of blanket licenses by performing rights organizations (ASCAP and BMI) to television networks at fees negotiated by them constitute a per se price-fixing violation of the Sherman Act?
Opinions:
Majority - Mr. Justice White
No. The blanket license issued by ASCAP and BMI is not a per se price-fixing violation of the Sherman Act. The practice must be assessed under the rule of reason because it is not a 'naked restraint of trade' but rather accompanies the creation of a unique product with significant market efficiencies. The blanket license is more than the sum of its parts; it is a distinct product that integrates sales, monitoring, and enforcement, solving a market problem of prohibitively high transaction costs that individual artists cannot overcome. This arrangement creates a market that might not otherwise exist. Furthermore, a realistic alternative is available to users like CBS, who can, under the governing consent decrees, bypass the blanket license and negotiate directly with copyright owners. Given these pro-competitive justifications and the availability of alternatives, the practice cannot be condemned as automatically illegal without a more discriminating examination of its actual effect on competition.
Dissenting - Mr. Justice Stevens
No, the blanket license is not a per se violation, but it is an unreasonable restraint of trade that should be invalidated by this Court without remand. While the majority correctly rejects the per se label, the extensive trial record clearly demonstrates that the practice violates the rule of reason. The blanket license's all-or-nothing approach eliminates all price competition among individual musical compositions, as the user's cost is untethered to the quantity or quality of music used. This pricing structure, based on a user's revenue, is a classic form of economic discrimination. The refusal of ASCAP and BMI to offer anything other than their full repertories is the core anticompetitive problem, functioning like an illegal blockbooking scheme. While direct dealing is theoretically possible for a market giant like CBS, the substantial costs and risks involved create insurmountable barriers for most buyers and inhibit even CBS, proving that the market is not truly competitive.
Analysis:
This decision significantly refined antitrust analysis by moving away from a rigid, literal application of the per se rule against price fixing. It established that before condemning a practice as per se illegal, courts must first characterize the conduct to determine if it is a 'naked restraint' or an ancillary part of a pro-competitive, integrated venture. By treating the blanket license as a new product that increases market efficiency, the Court signaled that joint ventures among competitors would be judged more leniently if they create value that could not be achieved individually. This case reinforces the rule of reason as the predominant standard in antitrust law, reserving the per se rule for only those practices with which courts have extensive experience and which almost always lack any redeeming virtue.
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