Delrahim: “Don’t Stop Believing” in the music decrees
By Gus Hurwitz
Almost fifty years ago the Rolling Stones sang that iconic line: “you can’t always get what you want.” Mick Jagger probably wasn’t thinking of administrative law when writing the album “Let it Bleed.” However, fifteen years later the U.S. Supreme Court seemed to set out to prove Jagger wrong. In its Chevron decision, the Supreme Court directed federal courts to defer to agencies’ interpretations of statutes, giving agencies broad discretion to use those statutes to get whatever policies they may want. Today, agencies are able to get whatever statutory interpretation they want with the barest minimum of justification. Indeed, the doctrines of judicial deference even allow agencies to reverse course or flip-flop between policies for almost any reason, including “the election of a new President of a different political party.”
But you don’t get a reputation for “moves like Jagger” by being wrong. While agencies have very broad discretion to interpret adopt and change policies to get what they want, that discretion does have its limits. This is perhaps most strongly the case when a market has significantly relied on the current policy. Justice Scalia wisely stated that “it would be arbitrary or capricious to ignore” serious industry reliance interests. According to the Supreme Court’s FCC v. Fox decision, this means that an agency needs to engage in greater process and provide a more detailed justification for a change in policy on which the industry significantly relies.
This is the situation the music industry finds itself in with respect to the Department of Justice’s (“DOJ”) ongoing review of its quasi-regulatory consent decrees. Assistant Attorney General Makan Delrahim has launched a project to review some 1,300 perpetual consent decrees and retire those that are either no longer applicable or no longer support the goal of promoting competition. This is a laudable goal, and many of these decrees should be terminated without issue. However, at a roundtable discussion and speech Delrahim has suggested that he may end the ASCAP and BMI music consent decrees. The music industry was built on these decrees and it would be very difficult to terminate them without taking into account this reliance. Just because what you want may be to reverse policies that impose unnecessary regulations, sometimes that is not what you need.
Almost eighty years ago, DOJ struck a bargain that worked. It agreed to allow ASCAP and BMI (known in the industry as performance rights organizations (“PROs”) to bundle the song rights of many competing publishers and songwriters into a product called the blanket license. On its face, this looks like price fixing – each PRO is a group of competitors coming together and agreeing to sell all of their content for a common price. But there are also massive benefits to consumers of licensing music this way, because they don’t need to negotiate with every single artist whose music they may want to use at events and other public setting. So the DOJ agreed to allow the PROs to engage in potentially problematic but overwhelmingly beneficial bundled licensing, so long as the PROs agreed to certain rules. Practically, this meant that the DOJ became a sort of regulator of last resort, ensuring that the PROs didn’t violate the terms of this agreement. This is not a role that law enforcement agencies like the DOJ typically play, but the DOJ of the time believed it to be necessary, and both courts and later administrations have affirmed the usefulness of these decrees.
The music consent decrees were not a perfect solution, and there are probably alternative methods of achieving the same goal without the need for indefinite decrees and continued DOJ oversight. But as the great philosopher Jay-Z said: “in order to survive, gotta learn to live with regrets.” The industry has come to rely on these decrees after eighty years of living with them. Indeed, it’s fair to say that much of today’s music industry is built around them. These decrees simply cannot be ended without disrupting an entire industry. The law needs to respect this reliance and should not disrupt the status quo unless there is some compelling need and a clear path forward for the industry. As Justice Scalia rapped, anything less would be “arbitrary and capricious.”
Like Makan Delrahim, I believe in reducing needless regulation. So it may come as a surprise that I’m cautioning against removing consent decrees that act as pseudo-regulations. However, there are certain principles of governance that should trump what we want. I argued this extensively during the proceedings surrounding the FCC’s 2015 “net neutrality” order. There the Obama administration’s FCC showed little respect for prior interpretations of the law that had engendered serious reliance interests. I even urged the Supreme Court to review the DC Circuit Court of Appeals’ affirmance of the FCC’s 2015 order on the grounds that the Circuit court failed to respect these reliance interests.
Conservatives ultimately believe in the power of well-functioning industry to self-correct. That also means that we should not disrupt an industry that is functioning well, at least without good reason. And the music industry has been doing great lately. ASCAP reported that it distributed over $1 billion to its songwriters for the first time last year, and an 11% growth in licensing revenues from the US alone. BMI likewise claimed this milestone, thanks to a 7% growth in domestic revenue. We need a strong argument to justify risking this performance by removing a significant legal framework supporting this revenue growth.
It may take some “sympathy for the devil,” but the ASCAP and BMI consent decrees are worth keeping unless there is a way to remove them without disrupting the industry built upon them. Unfortunately, that may be an impossible task for the DOJ to accomplish on its own. Removing these consent decrees requires putting something new in their place. But fundamentally, the DOJ is not a regulatory agency: it has limited ability to craft the new rules that the industry would need to rely upon were the PRO consent decrees rescinded. That is a task that only Congress can accomplish.
Like the Eagles, Delrahim should “take it easy” on the music consent decrees. They may not be what we want, but the industry’s ability to adapt and thrive under the decrees has given us the music we enjoy.
