Online Music: Antitrust and Copyright Perspectives

• Date: 01 June 2002
• Author: Jeffrey L. Harrison
• Published date: 01 June 2002
• DOI: 10.1177/0003603X0204700208
• Subject Matter: Article

The Antitrust Bulletin/Summer-Fall 2002

Online

music: antitrust and

copyright

perspectives

BY

JEFFREY

L. HARRISON*

465

Advances in technology have led once again to the intertwining

of

copyright and antitrust law. This time, these issues are raised by

the cooperative efforts of record companies to offer online music

services.'

From

an antitrust perspective, there are two layers

of

concern.

The

first

is

about

each

joint

venture

independently.

These joint ventures are, after all, agreements among competitors.

Anegative impact on competition would bring section 1 of the

Sherman Act into play. Beyond this is the question

of

the emerg-

ing market structure in the new industry. One possibility is that

the industry leaders will engage in exclusive reciprocal licensing

that will have the effect

of

ensuring that the market evolves to an

oligopoly or duopoly structure. With so few market participants,

economic theory suggests that the likely outcome will be a stable

one

consisting

of

parallel

conduct

without

the

necessity

of

an

express agreement." As antitrust scholars know, the problem

of

*

Stephen

C.

O'Connell

Professor

of

Law,

College

of

Law,

The

University

of

Florida.

At

this

time

attention

has

focused

on

MusicNet

and

Pressplay.

MusicNet

was

formed

by AOL Time Warner, Inc.,

Bertelsmann

AG,

EMI

Group

PLC

and

RealNetworks, Inc., and Pressplay by Vivendi Universal

SA,

and

Sony

Music.

This

is sometimes referred to as a Nash Equilibrium. See

PAUL

L.

SAMUELSON

&

WILLIAM

D.

NORDHAUS,

ECONOMICS

192 (15th ed. 1995).

© 2002 by Federal Legal Publications. Inc.

466

The antitrust bulletin

parallel conduct is one

of

the most vexing in the field. Thus, a key

question in the online music

industry

is

whether

there

can

and

should be intervention before the industry fully develops because

once

an

oligopoly

market

structure

is

established,

the

industry

may have reached akind

of

safe haven.

All of these antitrust concerns are played out in the context

of

copyright law. Indeed, the stimulus for the creation

of

the record-

company-sponsored online music services lies in the huge success

of Napster, the online service that was too free in assisting its sub-

scribers in downloading

copyrighted

music."

What

Napster

did,

ultimately, was violate the exclusive rights

of

copyright holders."

No

doubt

any

objection

to

the

licensing

practices

of

the

new

online services will be met with the argument that the online ser-

vices

have

exclusive

rights

to

license

the

use

of

the

recorded

music. In fact, as in all instances in which copyright and antitrust

intersect, the overarching problem is that antitrust is designed to

limit exactly what copyright seems to

grant-market

power,"

This

article first

addresses

the

antitrust

issues

that

may be

raised with respect to the online music service

joint

ventures. The

purpose is to examine the issues and possible reactions as though

the industry did not involve

copyrighted

material.

For

this pur-

pose, the emphasis is on viewing online music

joint

ventures in

the context of Broadcast Music, Inc. v. Columbia Broadcasting

System, Inc. (BM/)6

and

relatively

recent

Supreme

Court

cases

announcing the post-Chicago approach to group boycotts."

Then

A.&M. Records Inc. v. Napster, 239 F.3d 1004 (9th Cir. 2001).

4More accurately, Napster was found to have infringed and to con-

tributorily infringed.

It

is important, however, to distinguish between the

power

one is

afforded by virtue of the exclusivity granted by copyright and the market

or dominant power

of

concern in antitrust. Rarely will a grant

of

copy-

right create in a holder any significant degree

of

market power.

6441 U.S. 1 (1979).

See Northwest Wholesale Stationers, Inc. v. Pacific Stationery &

Printing Co., 472 U.S. 284 (1985);

FIC

v. Indiana Federation

of

Dentists,

476 U.S. 447 (1986). See generally E.

THOMAS

SULLIVAN

&

JEFFREY

L.