1 F. Supp. 3d 180
S.D.N.Y.2014Background
- SESAC is the third and smallest U.S. PRO; unlike ASCAP and BMI it has never been subject to a consent decree, but since 2008 has had greater unilateral licensing latitude.
- Plaintiffs are groups of local television stations alleging SESAC’s licensing practices since 2008 effectively foreclosed alternatives to its blanket license for affiliates’ works.
- SESAC offers blanket licenses (covering all affiliates’ works), per-program licenses (PPLs), direct licenses, and source licenses; historically, stations used blanket licenses from all PROs.
- From 1995–2004 SESAC engaged in industry-wide blanket licenses via the Television Music License Committee (TMLC) and MRI; in 2005–2007 an arbitration-based regime set terms and allowed PPLs if agreements failed.
- In 2008 SESAC ceased arbitration, negotiated individually with stations, raised blanket rates, and revised the PPL formula to include new costs (ambient/incidentals and a 50% weighting), rendering PPLs economically non-viable; interim licenses and cease-and-desist letters pressured stations to accept blanket licenses.
- DOJ investigated SESAC in 2008 but took no action; plaintiffs filed suit in 2010 alleging Sherman Act §1 and §2 violations; SESAC moved for summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether SESAC’s blanket license and related affiliate agreements violate §1 | Pl. allege concerted action among SESAC and affiliates to foreclose competition | SESAC argues no broad conspiracy; blanket license is not per se illegal and evidence insufficient for broad collusion | Genuine issues of fact exist; §1 claim survives, with narrow grounds on per se theory and broad conspiracy among all affiliates rejected |
| Whether there is proof of concerted action among SESAC and affiliates | Affiliates expected SESAC to offer a blanket license pooling rights | Affiliates’ agreements do not prove a shared expectation of pooling; evidence insufficient | Evidence supports concerted action among SESAC and the subset of affiliates with supplemental agreements; narrow conspiracy to restrain trade viable |
| Whether SESAC’s conduct is governed by per se rules or rule of reason under §1 | Blanket license foreclosure should be per se unlawful | BMI v. CBS precludes per se treatment for blanket licenses; analysis should be under rule of reason | Per se theory rejected; §1 liability analyzed under rule of reason; blanket license not per se unlawful |
| Whether SESAC has monopoly power and engaged in exclusionary conduct under §2 | SESAC’s actions foreclose competition and protect its blanket license | Monopoly power over its own product but not over all rights; conduct may be pro- or anti-competitive | Sufficient evidence to support §2 monopolization claim and likelihood of exclusionary conduct; summary judgment denied |
| Whether there is a viable §2 conspiracy to monopolize claim | Conspiratorial agreement among SESAC and certain affiliates to restrain competition | No proof of conspiracy; record shows potential unilateral action | Count Three survives based on concerted action with supplemental affiliates; jury question remains |
Key Cases Cited
- BMI v. CBS, 441 U.S. 1 (1979) (blanket licenses not per se illegal; benefits and market realities justify rule-of-reason review)
- Buffalo Broadcasting Co., Inc. v. ASCAP, 744 F.2d 917 (2d Cir. 1984) (realistic alternatives to blanket licenses show no §1 violation)
- CBS Remand, 620 F.2d 930 (2d Cir. 1980) (blanket license not inherently unlawful; alternatives matter under rule of reason)
- National Cable Television Ass’n, Inc. v. BMI, 772 F.Supp. 614 (D.D.C. 1991) (examined alternatives to blanket licenses and market power in cable programming context)
- Leegin Creative Leather Prods., Inc. v. PSKS, 551 U.S. 877 (2007) (concept of rule-of-reason balancing pro- and anti-competitive effects)