NCAA Found To Violate Antitrust Laws In Preventing Schools From Sharing Licensing Revenue With Student Athletes

from the antitrust dept

It's long been recognized that the NCAA sports setup is a bit of a scam, in which "student" athletes make various colleges a ridiculous amount of money -- none of which actually makes it to the athletes themselves. In many cases, these are barely actually "students" at all. And while some of the athletes may later cash in by going pro, many do not. A few years ago, we wrote about a class action lawsuit brought by basketball player Ed O'Bannon over the fact that his likeness was appearing in an EA video game, and that the NCAA had basically violated antitrust laws in effectively forcing him (and all NCAA athletes) to sign away all such rights for no compensation. The case has gone back and forth over the years, but on Friday Judge Claudia Wilken sided strongly with the players, finding the NCAA had clearly violated antitrust laws.

The NCAA was done in by a variety of factors, but it appears that its own economic expert did not help matters. While he argued that the NCAA's activities were "legal" he also more or less helped make the case that they were violating antitrust laws:

Dr. Noll’s opinions are consistent with the opinions of the NCAA’s own economic expert, Dr. Daniel Rubinfeld, who testified that the NCAA operates as a “joint venture which imposes restraints” on trade.... Dr. Rubinfeld specifically acknowledged that “the NCAA does impose a restraint, the restraint we have been discussing in this case.” Id. 2921:8-:9. Although he opined that this restraint was lawful because it serves procompetitive purposes, he never denied that the NCAA restricts competition among its members for recruits. In fact, his own economics textbook specifically refers to the NCAA as a “cartel,” which he defined during his testimony as “a group of firms that impose a restraint.” ... Although the NCAA’s other economic expert, Dr. Lauren Stiroh, testified that the NCAA does not restrain competition in any market, her opinions were based on the theory that anticompetitive effects cannot arise unless consumers in a “downstream market” are harmed.... In this case, those consumers would be people who watch or attend college football and basketball games or purchase goods using the names, images, and likenesses of student-athletes. The Court rejects Dr. Stiroh’s theory that Plaintiffs cannot show any anticompetitive effects caused by the alleged restraint without demonstrating some harm to these consumers. The evidence cited above demonstrates that student-athletes themselves are harmed by the price-fixing agreement among FBS football and Division I basketball schools. In the complex exchange represented by a recruit’s decision to attend and play for a particular school, the school provides tuition, room and board, fees, and book expenses, often at little or no cost to the school. The recruit provides his athletic performance and the use of his name, image, and likeness. However, the schools agree to value the latter at zero by agreeing not to compete with each other to credit any other value to the recruit in the exchange. This is an anticompetitive effect. Thus, the Court finds that the NCAA has the power -- and exercises that power -- to fix prices and restrain competition in the college education market that Plaintiffs have identified.

The court goes further, in noting that the NCAA's restrictions on student athlete compensation aren't justified, going through the long history of how the NCAA's views have changed over time:

The Court finds that the NCAA's current restrictions on student-athlete compensation, which cap athletics-based financial aid below the cost of attendance, are not justified by the definition of amateurism set forth in its current bylaws.

The court also completely rejects the claims by the NCAA that it's popularity is based on the fact that athletes aren't compensated.

Other historical evidence suggests that the NCAA’s restrictions on student-athlete compensation have not contributed significantly to the popularity of FBS football and Division I basketball. The NCAA’s former president, the late Walter Byers, testified during his 2007 deposition, for instance, that the NCAA’s decision to remove incidental expenses from the grant-in-aid coverage in 1975 was not motivated by a desire to increase consumer demand for its product.... In fact, he specifically noted that NCAA sports experienced a tremendous growth in popularity during the period between 1956 and 1975 when grants-in-aid still covered the full cost of attendance.

In the end, it becomes clear that the NCAA is acting in a manner that pretty clearly violates antitrust law:

Because FBS football and Division I basketball schools are the only suppliers in the relevant market, they have the power, when acting in concert through the NCAA and its conferences, to fix the price of their product. They have chosen to exercise this power by forming an agreement to charge every recruit the same price for the bundle of educational and athletic opportunities that they offer: to wit, the recruit’s athletic services along with the use of his name, image, and likeness while he is in school. If any school seeks to lower this fixed price -- by offering any recruit a cash rebate, deferred payment, or other form of direct compensation -- that school may be subject to sanctions by the NCAA.

This price-fixing agreement constitutes a restraint of trade. The evidence presented at trial makes clear that, in the absence of this agreement, certain schools would compete for recruits by offering them a lower price for the opportunity to play FBS football or Division I basketball while they attend college. Indeed, the NCAA’s own expert, Dr. Rubinfeld, acknowledged that the NCAA operates as a cartel that imposes a restraint on trade in this market.

The court rejects the idea that free tuition is a reasonable exchange, noting that the licensing rights the student athletes give up is clearly worth much, much more.

While the court does find antitrust problems, it's interesting to note that it does not find harm done to the video game licensing market. After saying that such a market would likely exist without the NCAA's rules, that doesn't mean there's anti-competitive harm:

Nevertheless, Plaintiffs have not identified any injury to competition within this submarket. Just as in the live telecasting submarket, the ultimate buyers in this submarket -- videogame developers -- would need to acquire group licenses from a specific set of teams in order to create their product. This set might include all of the teams within Division I, all of the teams within the major conferences, or some other set of teams that the videogame developer believed would be necessary to produce a marketable product. Regardless of which teams were included within that set, those teams would not compete against each other as sellers of group licenses, even in the absence of the challenged rules, because they would all share an interest in ensuring that the videogame developer acquired each of the group licenses required to create its product. These teams would also not compete against any teams outside of the set because the videogame developer determined that those other teams’ group licenses were not required to produce the videogame. Indeed, competition between teams (or conferences) is even less likely in the videogame submarket than the live telecasting submarket because videogame developers -- unlike television networks -- are not constrained by the number of group licenses that they could use to produce their product. The evidence presented at trial demonstrates that videogame companies could, and often did, feature nearly every FBS football and Division I basketball team in their videogames. Under these circumstances, competition among individual teams and conferences to sell group licenses is extremely unlikely. And, to the extent that it happens (or would happen), it is not restrained by the challenged NCAA restrictions on student-athlete compensation. Thus, just as with the live telecasting submarket, the challenged rules do not suppress competition in this submarket.

Either way, the NCAA is going to appeal this decision -- but if it stands, it will likely have a pretty big impact on the nature of college sports going forward, changing the ways in which student athletes are compensated in general. The NCAA is ordered to allow colleges to offer to share licensing revenue with students (and refuses to have the ruling stayed, though it doesn't go into effect just yet anyway -- and it's possible that the appeals court would grant a stay also).

Filed Under: antitrust, college sports, ed o'bannon, licensing
Companies: ncaa

ASCAP's Desire To End Antitrust Agreement Leads DOJ To Investigate Latest Collusion Between Music Publishers

from the look-at-that dept

Over the last few months, you may have noticed that ASCAP, BMI and the various music publishers have been pushing strongly to end the so-called "consent decree" around music publishing. This was an agreement from 1941 (and reviewed in 2001) limiting how performance rights organizations like ASCAP and BMI could act, given their position as a somewhat natural monopoly over the compositions they represented. The idea was to stop those companies from holding those works hostage -- which is why there are things like rate setting procedures by the Copyright Royalty Board. Now, we have our problems with the CRB and the rate setting process, but there is a very real fear that ASCAP, BMI and others would make music streaming prohibitively expensive if given the chance. The whole focus on getting rid of the consent decree is to try to remove any effort to block them from jacking up their prices to ridiculous rates.

The attempt to ditch the consent decree seemed especially odd, given that just months earlier, a court had called out the clear collusion by ASCAP and a bunch of music publishers to try to artificially jack up Pandora's rates. The details were a little convoluted, but basically certain publishers "withdrew" certain music from ASCAP, claiming they wanted to negotiate directly with Pandora. They didn't negotiate in good faith, and basically waited right up until the deal was about to expire. They then refused to even name what songs would no longer be covered, leaving Pandora at a very real risk of streaming songs it no longer had the right to (without even knowing which songs were being "pulled.") Because of this, Pandora was forced to sign exorbitantly high rates, which ASCAP and others then used to try to get even higher rates for others. It was clearly collusion, because while ASCAP should have been upset about publishers withdrawing music, it clearly was not. Furthermore, there were clear discussions between ASCAP and the publishers about all of this.

The end result of that case was that ASCAP lost its attempt to really jack up rates to Pandora much higher, but many people wondered how ASCAP could get away with doing that without any sort of punishment. Well... new reports say that the Justice Department is investigating ASCAP, BMI, Universal Music Publishing and Sony/ATV over possible collusion. This is being done as part of the DOJ's review of the consent decree, but ASCAP's decision to attack the consent decree right after a court called it out for collusion may backfire badly:

The CID requests are seeking documentation across a lot of particulars, including the effect of the consent decrees on rates, whether partial withdrawals of digital rights should be allowed, and plans to license other rights beyond the public performance rights that PROs handle today. However, a memo obtained by Billboard that was sent to employees by ASCAP senior VP of legal Richard Reimer began by noting that the CID is connected to the DOJs review of the consent decree. And, as a possible reminder to be careful of what you wish for, the DOJ is also investigating of alleged coordination among ASCAP, BMI, Sony/ATV Music Publishing, and Universal Music Publishing Group.

That aspect of the DOJ investigation was mentioned in a note to ASCAP employees telling them to "preserve all documents, whether in paper or electronic format, on all the CID-related topics."

In the Billboard article, the publishers and ASCAP insist they're not worried about all of this because they believe the judge in the Pandora rate setting case "got it wrong." That's quite a bit of hubris to have, given all of the evidence of collusion that was presented in that case. It seems quite possible that rather than ending the consent decree, as ASCAP and publishers would like, the DOJ may actually come down on all of them for some fairly serious antitrust problems.

Filed Under: antitrust, collusion, consent decree, doj, music, music publishing, partial withdrawals, streaming rates
Companies: ascap, bmi, pandora, sony music, sony/atv music publishing, umg, universal music, universal music publishing group

Forget The FCC: Should We Be Looking To The FTC To Save An Open Internet?

from the that-could-be-something dept

Nearly all of the focus on the big net neutrality fight of the summer has been on the FCC. This makes sense, since the FCC regulates internet and phone access providers, and that's where this battle is. The small bits of focus that go beyond the FCC seem to move only over to Congress, and the question of whether or not it would push some sort of legislation that would mandate the FCC do something different. But, the problem is that Congress simply won't do anything on this (the issue is too partisan and too toxic) and the FCC appears to be similarly constrained, mainly by a chronic lack of backbone, combined with the ever present revolving door between the FCC and the telco/cable companies they "regulate" (a problem we've been reporting on for years). The FCC could do some things, but just doesn't seem motivated to (yet).

However, it seems that another option that gets no attention at all might be having the FTC, rather than the FCC, rescue the open internet and put the big broadband players in their space. The Federal Trade Commission has a fairly broad mandate to protect consumers, and while there are times that I worry its crusading can go a little far, for the most part, it really does seem to do a good job figuring out ways to step in where other parts of the government are failing to protect the public and innovation. While Congress and the USPTO are still failing to do anything useful about patent trolls, the FTC has been looking for ways to combat trolls for a few years. The FTC has also gone to bat for innovative companies stymied by local regulations, including Tesla and Uber. Over at the Disruptive Competition blog, Glenn Manishin has a great post about the FTC's "competition advocacy" and how important it is in a variety of markets.

It seems like the FTC can -- and perhaps should -- get involved in the net neutrality fight. In fact, in many ways, it may be a much better fit, in part because it could pretty easily justify getting involved at a few key juncture points. First, it could easily jump in on the current interconnection disputes, which appear to be where the real fight is happening these days (and it's an area which the Tom Wheeler FCC is insisting is "separate" from the net neutrality fight, even though it's really not). The interconnection fights have been a way for the big broadband providers to get everything they want without "technically" violating the concept of net neutrality on the last mile. The link above describes this if you haven't paid close attention to the differences between the fight over discrimination on the last mile and with interconnection.

But the key issue with the interconnection fights, as we were just explaining, is that the the broadband players are simply failing to deliver to end users what they sold them -- and that's a classic example of the situations where the FTC normally steps in. Customers of broadband providers are paying them to deliver the content they request over the internet, and the broadband providers are purposely not delivering that content at a quality level they have promised to provide. It seems like a situation where the FTC might easily step in and point out that broadband providers made commitments to customers that they have failed to deliver.

A second area where the FTC could have an impact is in the arena of competition advocacy to get around local barriers to competition. As we've discussed at length over the years, the big broadband players have worked incredibly hard to ban competition at the local level, often in egregiously offensive ways, including (but not limited to) total bans on municipal broadband in 20 different states -- even as many (though, certainly not all) municipal broadband projects have shown tremendous success, and with that success comes better broadband.

While Tom Wheeler has indicated that the FCC may step in to preempt state laws that block competition, the FTC can start taking action on that as well, putting pressure on states and cities, as it's done with things like Uber and Tesla. Furthermore, it seems that if broadband providers like Verizon are going to make use of common carrier rules in order to get subsidized access to rights of way such as conduits and electrical poles (while trying to stay free of the exact same rules for the same services they run over those lines), the very least they can do is let others get access to the same opportunities.

At the heart of all of this is anticompetitive practices by the big broadband players, and that's exactly where the FTC is supposed to step in and do something. To be fair, the FTC has explored this issue in the past, and some in the FTC have suggested they should take a larger role in the process. And, in the meantime, there are clear pros and cons to an FTC approach rather than an FCC one (including the lack of a specific ability to outright ban discriminatory practices) -- but with a weak FCC and a nearly impotent Congress on this issue, it seems like getting the FTC ramped up and involved in this issue might actually lead to better long-term results.

Filed Under: antitrust, competition, fcc, ftc, interconnection, muni broadband, net neutrality, open internet, peering
Companies: at&t, comcast, verizon

German Official Says It May Be Time To Break Up Google... Just Because

from the huh? dept

Having already gone through antitrust investigations in both the US and in Europe, without facing any serious penalties (and having regulators more or less recognize that Google wasn't doing anything anti-competitive), it appears that Google's angry competitors are still going to keep trying. The latest is that a bunch of publishers in Europe demanded that the European Commission try again, while a top official in Germany, economy minister Sigmar Gabriel, announced that it was time to "break up" Google. Then, over the weekend, another top European politician, Martin Schulz, the center-left's candidate to lead the European Commission after the EU parliamentary elections coming up shortly, argued that there need to be many more regulations on Google, because... well... because he doesn't seem to like the company very much.

As always, when a company gets big, there are reasonable concerns about whether or not it may be abusing market power. But the problem here is that every time anyone actually looks into Google's activities, they find no evidence of it abusing its market power in any way that harms consumers. Some companies tend to get upset that they're not ranked high enough, or that consumers prefer Google's competing services to their own. But there's no evidence of consumer harm at all. The entirety of the antitrust argument against Google seems to be "well, the company is big." And, for some in Europe, it seems to be "the company is big, and based in the US." Again, that's something worth watching, to make sure that Google doesn't abuse its position, but for all the complaints, there never seems to be any evidence showing any actual consumer harm.

As for the argument about breaking up Google... well, good luck with that. I'm curious how Germany breaks up an American company. In fact Gabriel's own spokesperson more or less admitted that Germany had no way to enforce a breakup, but that didn't seem to be worth reconsidering the idea:

"With a breakup of Google the global dimension would naturally raise questions of enforceability," Rouenhoff told reporters in Berlin. "Such a procedure would take a certain amount of time."

There are times you think that Google might just be better off saying "okay, fine," and blocking German IPs from reaching its services, just to see how the public would react. To date, Google has always made it clear that it would like to avoid that kind of gamesmanship. But, at times, you wonder if people realize what exactly they're complaining about.

Filed Under: antitrust, europe, germany, martin schulz, search, sigmar gabriel
Companies: google

Learning From AT&T's Blistering Hubris On T-Mobile Deal, Comcast Tries A Dash Of Subtlety

from the BS-can-only-take-you-so-far dept

While the assumption was that AT&T's attempted takeover of T-Mobile was shuttered simply because it eliminated a needed competitor from the market, one of the biggest, under-stated reasons was simply AT&T's immense, blistering hubris, forged by decades of being pampered by the government. AT&T didn't just push for the T-Mobile merger, they lied aggressively and at every possible opportunity about the deal's benefits, believing themselves to be impervious to repercussions. They lied in claiming the deal would create 100,000 jobs. They lied about needing to acquire T-Mobile or their network would implode from lack of spectrum. They lied in claiming that eliminating a competitor would somehow magically improve competition.

And they didn't just lie -- AT&T was loud about it. Via lobbyist, consultant, think tanker, and anyone else on the payroll, AT&T lied using every manner of lobbying trick in the book, from paying an army of third party groups to parrot merger support, to running an onslaught of constant full page advertisements repeating the same, easily-disproven lies ad nauseam. At the end of 2011, Cecilia Kang at the Washington Post penned what was essentially an obituary for the AT&T T-Mobile deal, with an overlooked paragraph that explained precisely why the deal became too much for regulators to swallow:

"The letters from third-party groups raised eyebrows at government agencies and on the Hill, where people began wondering why groups with no obvious ties to broadband were writing in. News reports emerged showing that many of the groups had financial ties to AT&T. Then there were the ads that staff members at the FCC said they couldn't avoid when they opened a newspaper, fired up their iPads or watched TV — all touting the merger's ability to put thousands of Americans to work. But who had ever heard of a big company merger creating rather than destroying jobs?"

The Post noted that instead of all this noise and fury helping to get approval, it actually caused regulators to take a closer look at claims where otherwise they wouldn't have. The sheer volume of nonsense coming from AT&T actually worked to amplify media and political pressure where it might not have existed otherwise. The end result was regulators actually doing their jobs and digging into the promises more deeply, only to find AT&T's arguments lacking:

"AT&T's blitzkrieg of ads, which claimed that the promised expansion of broadband would create 100,000 jobs, wasn't helping either. A deal's impact on jobs is not typically part of an evaluation by antitrust officials, but this time regulators thought AT&T's campaign had forced them to take a closer look. They found holes. For one, the company refused to divulge how many jobs it would eliminate in the merger."

Enter Comcast, who is busy trying to get regulators to approve their $45 billion acquisition of Time Warner Cable. Renata Hesse, who was the lead FCC antitrust official during the AT&T T-Mobile deal, will be overseeing the Comcast review at the DOJ. While Comcast is using many of the very same strategies AT&T employed (like paying minority groups to parrot merger support, and throwing money at everyone and everything) they seem to have learned a few lessons from the AT&T T-Mobile deal, and have dialed back the volume on their nonsense just enough so that it vaguely-resembles subtlety:

"Industry lobbyists familiar with both deals say they observe Comcast approaching this merger in a much quieter, more subtle way than AT&T did. Many of Comcas's lobbyists are staying silent about the deal altogether, and not just around reporters. Even at social gatherings and business functions where it might seem obvious to mention the deal to lawmakers or administration officials as a way of smoothing the way forward, Comcast's lobbyists have, in many instances, made nary a peep about it, according to sources. "The way Comcast is approaching this is very interesting,” said a veteran telecom lobbyist. "Everybody's writing the easy story about how many lobbyists Comcast has, but the way they're lobbying this, they're being very inside baseball, very surgical."

That's not to say Comcast isn't paying a ton of other people to make stupid, loud arguments for them, but they're pretty clearly trying to tone down the rhetoric the public sees as having come from Comcast itself. Comcast's steering clear of unsubstantiated job claims, and seems intent on keeping any promises they do make vague (like arguing the deal is simply "pro consumer"). Will a tiny bit of subtlety let Comcast fly under the regulatory M&A skepticism meter? Maybe. Comcast has proven pretty good at getting regulators to push for meaningless merger conditions (though AT&T was pretty good at that too). I'm going to bet you see deal approval; not because the deal is necessarily good, but primarily because AT&T taught Comcast an important lesson on the limits of bullshit.

Filed Under: antitrust, fcc, lobbying, merger
Companies: at&t, comcast, t-mobile

Surprise: ASCAP and Music Labels Colluded To Screw Pandora

from the incredible dept

On Thursday, ASCAP -- the American Society of Composers, Authors and Publishers -- will turn 100 years old. ASCAP was the original music collection society in the US, and over the years we've detailed just how out of touch and obsolete it has become, basically harming independent artists to help rock stars. At the same time, it has bizarrely lashed out at Creative Commons, and when Larry Lessig offered to debate ASCAP boss (and famed songwriter) Paul Williams, Williams refused while claiming it was all an attempt to silence ASCAP.

Yet, in the last few years, we've been covering the incredible and bizarre legal fight between ASCAP and Pandora, which has seen ASCAP stoop to amazing lows. You can read some of the basic background in some of our previous posts. A key part of this was that the major labels, key members of ASCAP, suddenly started "dropping out" of ASCAP in order to do licensing directly. At first we thought this was a sign of how the labels might be realizing that ASCAP was obsolete and out of touch, but it has since become clear that these "removals" were all something of a scam to force Pandora into higher rates.

What happened was that ASCAP and Pandora had first negotiated a higher rate than Pandora had agreed to in the past -- reaching a handshake agreement. However, before that agreement could be finalized, these labels started "withdrawing" from ASCAP in order to negotiate directly. As part of that, both ASCAP and the labels refused to tell Pandora which songs had been withdrawn, meaning that if Pandora accidentally played one of the withdrawn songs (again, without knowing which songs were withdrawn), it would face massive copyright infringement liability. With its back to the wall, Pandora was forced to agree to much, much higher rates with those labels who had "withdrawn" their songs -- and then those labels magically put their songs back in ASCAP... and then ASCAP claimed that those newly "negotiated" deals represented "true market" deals, and argued that in an open market, it deserved those kinds of crazy high royalty rates. Pandora pointed out that this pretty clearly violated the antitrust decree against ASCAP -- an argument that Pandora won in the first round.

The case is moving forward, and many more details have been revealed, highlighting just how slimy ASCAP and the major labels have been about this. It makes it quite clear that the "withdrawals" were never actually about the labels withdrawing their music from ASCAP, but what certainly looks like collusion to have labels "withdraw," put a gun to Pandora's head, get them to agree to massively higher rates to avoid a lawsuit, and then feed that info back to ASCAP, which would continue "managing" the songs, even though they had been "withdrawn."

This comes clear in Paul Williams' deposition. Given that all these major labels were apparently "withdrawing" all of their digital rights, you might think (1) that ASCAP would be upset since it was losing all its key labels and (2) that Williams might look at reducing the cost of his licenses, since apparently they would no longer have all these important songs. Not so. From the trial transcript, here's Pandora's lawyer explaining how Williams responded when they asked him about it at his deposition:

"Did you ever consider that ASCAP could charge a lower price and try to get more people to use the works left in ASCAP rather than have users use the higher priced EMI repertoire?"

"Answer: Never once did that occur to me."

In other words, it was all about raising the rates. It was not about competition.

On top of that, it details how, even as these labels were "withdrawing," representatives from those very same labels/publishers still sat on ASCAP's board. As for that issue of the labels and ASCAP refusing to reveal what songs were being withdrawn, more evidence has come out during the case, showing that this was all part of the plan between the labels and ASCAP. In fact, they joked about it over email, which has now come out. During the opening, Pandora's lawyer told the story of Pandora seeking information about what songs were being withdrawn by Sony.

Your Honor, by the time Pandora asked for this information on November 1st, both ASCAP and Mr. Brodsky [Sony Executive VP] had in their possession this very list. The deposition testimony from ASCAP was that this list as is could have been delivered to Pandora within 24 hours were it only to get the go-ahead from Sony to do so. ASCAP never received the go-ahead.

We cited much of the internal back-and-forth on this in our briefs... My favorite is the following exchange between Mr. DeFilippis and Mr. Reimer of ASCAP on December 19th, 2013, PX 193. You see the question being asked by Mr. DeFilippis: why didn't Sony provide the list to Pandora?

Mr. Reimer's response: Ask me tomorrow.

Mr. DeFilippis: Right. With drink in hand.

And the inference here is just incredible. This data was sitting there, your Honor, and nobody was willing to give it to Pandora.

There's a lot more in there, but it seems abundantly clear that these labels "withdrawing" from ASCAP had nothing to do with competition or market rates. It appears that it had little to do with even withdrawing from ASCAP. Instead, it seems to have been designed from the start to basically screw over Pandora, in what certainly smells an awful lot like collusion, by forcing Pandora to pay exorbitant rates or suddenly face a massive copyright liability because no one would tell them what songs were being "withdrawn" from an existing licensing agreement. Then, ASCAP and the other labels could turn around and use those "agreements" pretending they represented a "market rate" to argue for higher rates at the Copyright Royalty Board, which is supposed to try to come up with a "market rate" for various licenses (even though the high rates were supposed to have a confidentiality agreement tied to them).

Considering ASCAP's previous antitrust problems, this certainly looks... incredibly sketchy. And then it's ASCAP going around claiming that Pandora is somehow trying to game the system? The whole thing is incredible, and paints a really nasty looking portrait of the highly questionable games that ASCAP and the major labels/publishers played to try to force ridiculously high licenses on Pandora by setting up fake competition, and putting a gun to Pandora's head.

ASCAP has often come across as sleazy in the past, but the details coming out at this trial take it to a whole new level.

Filed Under: antitrust, collection society, collusion, internet radio
Companies: ascap, emi, pandora, sony

Google Promises To Point To Competitor's Results To Settle Antitrust Claims In Europe

from the what-does-that-do? dept

Europe has been threatening antitrust charges against Google for quite some time now, and it appears that European regulators have now reached a bizarre settlement with Google in which the company promises "to give rivals more prominence in its promoted results," using a process in which those companies can bid on these slots. Here's how the NY Times describes it:

That includes displaying results from three competitors every time Google shows its own results for searches related to products, restaurants and hotels.

Rivals will have to pay Google each time their results are shown next to the search giant’s own results through a bidding process overseen by an independent monitor, according to European officials.

I'm at a loss as to how this makes any sense for anyone. First, why are European regulators involved in determining what Google should or should not show anyone? If Google users don't like the results they get, they don't have to stick with Google. Second, this actually gives Google's competitors less incentive to build a better product, because they get an easy in to be included in Google. How does that benefit anyone?

Yes, any time a company gets big, there are risks of them abusing their position -- and that's clearly what European regulators are concerned with. But what is the evidence of actual abuse here, and how does this solution prevent that abuse? That doesn't appear to be explained anywhere. This whole process, from the beginning, has appeared to be mostly a Microsoft-driven attempt to dump an annoying regulatory process on Google, just because it, too, has had to waste time with European regulators. Rather than compete by building better products, the focus has been on using the political process to try to slow down a competitor.

Filed Under: antitrust, competition, eu, europe, search
Companies: google, microsoft

Court Says ASCAP Can't Selectively Remove Songs From The Blanket License It Gives Pandora

from the some-sense dept

The legacy recording industry's ridiculous war on Pandora has reached some really ridiculous levels, especially as ASCAP has continually tried to pretend that Pandora was trying to stiff artists. The details suggested something entirely different. After staying quiet for a while, Pandora finally highlighted the true story, which showed that the claims about Pandora were completely bogus. It was actually ASCAP who was playing sick games with Pandora, trying to remove the right to play certain songs, without even letting Pandora know which songs.

Historically, Pandora has paid essentially the same rate as all other forms of radio, a rate established unilaterally by the performing rights organizations, ASCAP and BMI, in the late 1990s. In November of last year, following a lengthy negotiation, Pandora agreed with ASCAP to a new rate, an increase over the prior amount, and shook hands with ASCAP management. Not only was our hand-shake agreement rejected by the ASCAP board, but shortly thereafter we were subjected to a steady stream of “withdrawals” by major publishers from ASCAP and BMI seeking to negotiate separate and higher rates with Pandora, and only Pandora. This move caused us to seek the protection of the rate, also recently negotiated, enjoyed by the online radio streams of broadcast radio companies. It’s important to note that these streams represent 96% of the Internet radio listening hours among the top 20 services outside of Pandora (talk about an un-level playing field). We did not enter this period looking for a lower rate – we agreed to a higher rate. But in a sad irony, the actions of a few small, but powerful publishers seeking to gain advantage for themselves has caused all songwriters’ royalties to go down. Any characterization of Pandora as being out to cut publishing rates flies in the face of the facts.

And while not highlighted there, Pandora also noted that ASCAP refused to let Pandora know which tracks were being withdrawn, leading to uncertainty over potential liability if it played the wrong track:

During negotiations, ASCAP and the publisher increased the pressure by refusing to provide Pandora the list of tracks that were being withdrawn, exposing Pandora to copyright infringement liability of up to $150,000 per work. At Pandora’s scale, such liability would be enormous.

As we noted at the time, this appeared to be in direct violation of a long-term antitrust agreement ASCAP has with the DOJ, given ASCAP's massive market power. Some in our comments suggested it was crazy to suggest this move violated the antitrust agreement, but a court has basically ruled strongly in favor of Pandora, noting that it goes against the agreement to selectively remove songs from the blanket license, and allowing Pandora to continue to stream such songs. Basically, the court rules that the consent decree from the antitrust fight means that ASCAP can't divide up the various copyrights to separate out things like "new media rights," but rather if it has a song in its catalog, it must license it under its blanket license.

ASCAP’s argument is predicated on the Copyright doctrine of “divisibility of rights” within a copyrighted work. It is true that “[t]he Copyright Act confers upon the owner of a copyright a bundle of discrete exclusive rights, each of which may be transferred or retained separately by the copyright owner.” But while the Copyright Act allows rights within works to be alienated separately in general, [the consent decree] imposes restrictions beyond those imposed by the Copyright Act on ASCAP. [The consent decree denies] ASCAP the power to refuse to grant public performance rights to songs to particular users while, at the same time, retaining the songs in question in its repertory.

I await ASCAP's next press release insisting that Pandora is the one playing games....

Filed Under: antitrust, blanket license, streaming
Companies: ascap, pandora

Steve Jobs' Email Shows Apple Changed In-App Purchasing Rules Specifically To Retaliate Against Amazon

from the oops dept

In the ongoing legal fight between Apple and the DOJ over how Apple will be punished for violating antitrust law concerning ebooks, the DOJ has presented one interesting bit of new evidence: an email from Steve Jobs, in which he flat out tells Phil Schiller to change how in-app purchases work solely to punish Amazon for daring to suggest that it's easy to switch from an iPhone to Android, since your Kindle books show up in both places. In case you can't read that, it involves Schiller complaining to Jobs and other top Apple execs about a Kindle TV ad that shows someone buying an ebook via an iPhone and having it appear on an Android phone as well. He then notes:

While the primary message is that there are Kindle apps on lots of mobile devices, the secondary message that can't be missed is that it is easy to switch from iPhone to Android.

Not fun to watch

Less than an hour later, Jobs replies with a suggestion:

The first step might be to say that they must use our payment system for everything, including books (triggered by the newspapers and magazines). If they want to compare us to Android, let's force them to use our far superior payment system. Thoughts?

That's pretty damning, as it shows the decision had little to do with reasonable choices for consumers, and a lot to do with punishing a competitor.

Filed Under: android, antitrust, doj, ebooks, email, in-app purchasing, iphone, kindle, retaliation, steve jobs
Companies: amazon, apple