The Supreme Court ruled 8 to 1 yesterday that the laws against price fixing aren't automatically violated by the blanket licenses with which the works of nearly all professional composers are made available for public performers.
But the court sent the case back to the 2d U.S. Circuit Court of Appeals for a determination whether the licenses-issued by the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI)-violate "the rule of reason."
The licenses authorize those who hold them to perform any and all of the 4 million compositions in the organizations' repertories for a stated time period. Almost all radio and television broadcasters-the largest users of music-hold blanket licenses, usually in exchange for a percentage of total revenues or a flat dollar amount.
In rejecting a challenge to the system by the Columbia Broadcasting System Inc., U.S. District Judge Morris E. Lasker said that "convenience is the prime virtue of the blanket license: It provides comprehensive protection against infringement, that is, access to a large pool of music without the need for thousands of individual licenses which otherwise would be necessary . . ."
He was reversed by the 2d Circuit, giving a tentative victory to CBS, which one of its executives, in the trial, had described as "the giant of the world in the use of music rights" and the "No.1 outlet in the history of entertainment."
CBS supplies TV programs to about 200 affiliated stations; annually telecasts 7,500 network programs, many of which use recorded music on the soundtracks; owns stations in various cities; is itself a leading music publisher and is the world's largest manufacturer and seller of records and tapes.
In 1914, Victor Herbert and a few other composers organized ASCAP because it was impossible for individual copyright owners such as themselves to detect unauthorized uses of their work. With the advent of radio and then TV, the detection problem became insurmountable. Today, ASCAP has 22,000 members.
BMI, organized in 1939 and owned by members of the broadcasting industry, operates in much the same way as ASCAP. IT IS AFFILIATED WITH OR REPRESENTS ABOUT 10,000 PUBLISHING COMPANIES AND 20,000 AUTHORS AND COMPOSERS.
IN A COMPLAINT FILED ON NEW YEAR'S EVE 1969, FOLLOWED A BREAKDOWN IN NEGOTIATIONS WITH BMI over renewal of its blanket license, CBS alleged that blanket licenses violate the prohibition against price fixing in the Sherman Act.
In making this contention, CBS-and, later, the 2d Circuit-took what for the Supreme Court, termed a Literal Approach." That is, they perceived-accurately-that composers and publishing houses have joined into organizations that set the price for blanket licenses.
But that "hardly counsels that we should outlaw the blanket license as a. . . restraint of trade" on its face, White wrote. "Literalness is overly simplistic and often overbroad."
White recalled that the Justice Department first investigated allegations of anticompetitive conduct by ASCAP more than 50 years ago and filed a criminal complaint in 1934, but after getting a mid-trial continuance, "never returned to the courtroom."
In 1941, the government, in separate complaints against ASCAP and BMI, charged that the blanket license was an illegal restraint of trade. This resulted in a consent decree that imposed tight restrictions on ASCAP. The decree was amended extensively in 1950 but is still in force.
This history provides "a unique indicator that the challenged practice may have redeeming competitive virtues and that the search for those values is not almost sure to be in vain," White said. The decree "is a fact of economic and legal in life in this industry, and the Court of Appeals should not have ignored it completely in analyzing the practice," he added.
In the dissenting opinion, Justice John Paul Stevens agreed that the Sherman Act doesn't cally forbid blanket licenses-but said the rule of reason does.