The Intercept is reporting that the Biden administration is considering appointing Renata Hesse as Assistant Attorney General for Antitrust. The potential appointment has raised eyebrows in the press since Hesse in private practice worked on antitrust cases on behalf of both Google and Amazon. Google is already under antitrust investigation and if Hesse were to become AAG she’d at the very least have to recuse herself. Is it even appropriate to appoint someone that deeply conflicted? Were there no other antitrust attorneys in Washington DC to take the job?
But it’s even worse than it first appears.
Talk to any songwriter even tangentially involved in public policy and the story is much more alarming. Hesse isn’t just any Google/Amazon attorney. Hesse has a terrible history with songwriters. Last go around when Hesse was acting AAG for Antitrust in the Obama administration she tried to promulgate a new rule for songwriters that would have greatly benefited Google as it faced a $1 billion dollar lawsuit from an organization that represented songwriters. It was never clear why the DOJ took this action. It didn’t seem to emerge from any of the DOJ staff attorneys or public comments from licensees. She alone seemed to have pushed the change. The rule was so poorly reasoned the DOJ eventually drew two lawsuits. The DOJ lost one case and dropped/settled the other before it could be decided by the courts. During the fiasco it was revealed that Hesse had purposely omitted from her official DOJ bio her private practice work for Google fending off state antitrust investigations. As a result many people including myself have speculated the entire episode only made sense if the rule change was purposely proposed to help Google. In other words it looked suspiciously like a case of high level corruption that should have been investigated. It never was.
Here are the details:
First, the two biggest songwriter organizations BMI and ASCAP have been under “temporary” DOJ consent decrees since the early 1950s. Because of this songwriter public performance licensing and royalty rates are under the control of the DOJ. A single federal judge essentially sets the rates and terms for BMI songwriters and another judge for ASCAP. (Crazy right?) In the last 20 years digital broadcasters have become adept at exploiting this process to lower public performance royalties paid to songwriters.
As a result some songwriters have left these organizations and joined smaller organizations like Global Music Rights, because they are not under DOJ control and it is sometimes possible to get better royalty rates.
In 2014 Global Music Rights (GMR), alleged YouTube did not have the performance rights to about 20,000 works by artist GMR represents. These artists included some of the biggest artists in the business like the Eagles, Pharrell Williams and John Lennon. When Google refused to take down the works a lawyer representing GMR told the Hollywood Reporter that if Google doesn’t blink, “there will be a billion-dollar copyright infringement lawsuit filed.”
Not long after this happened the DOJ Antitrust section III (out of the blue) proposed a new rule for BMI and ASCAP. So called “100% licensing.” The rule basically said, if BMI or ASCAP controlled any portion of a song they could be forced to license the full 100% of the song. Not sure how the DOJ can force someone to licenses someone else share of a song, but I’m not a lawyer. Why does this matter? If you weren’t aware most hit pop songs are written by teams of songwriters and thus ownership is often shared by many writers. Professional songwriters typically enter into private contracts (co-administration agreements) with each other stipulating that they each administer and license their own shares of a song (fractional licensing). So if a movie studio wants to use a song, each of the writers must sign off on the contract. The DOJ proposal, 100% licensing, was odd. It went against longstanding industry practice. Further the DOJ antitrust section itself required this sort of fractional licensing in many of the contracts it supervised.
Songwriters and songwriter organizations were thus stunned by this development. At least until they realized that this was clearly helpful to Google in its dispute with GMR and thus made sense in a crony capitalist sort of way. Why? Well it is highly likely that many of those 20k tracks at the center of the GMR lawsuit were co-written with BMI and ASCAP writers (BMI and ASCAP writers/co-writers some weeks represent more than 90% of music streams). Thus by forcing the BMI and ASCAP cowriters to license songs on behalf of the GMR co-writers, the DOJ would effectively take hundreds of millions of dollars in statutory damages out of this lawsuit.
That is when attention began to focus on Renata Hesse. As Chris Castle at Music Tech Policy noted at the time:
“Ms. Hesse appears to be the thought leader behind imposing 100% licensing on the songwriter community. I arrive at this conclusion by process of elimination, as the DOJ professional staff do not appear to be taking credit for coming up with it on their own. Ms. Hesse is the one who has authority over the process, at least most directly, so if the DOJ professional staff did not originate the idea, and if no one in the voluminous consent decree public comments came up with it, it must have come down from on high. At least within the DOJ or even higher.
However, it is worth noting that the ASCAP/BMI consent decree review started before Hesse took over as head of the Antitrust Division from Bill Baer.
I doubt that Ms. Hesse came up with this all on her own, so I asked myself how did this person end up being in the position she is currently in with the authority to do so much damage to so many people who don’t deserve it. Not to mention the fact that when it comes to anything that the Google network touches, which is pretty much everything in human experience, the U.S. Government–at least currently and unlike their European counterparts–only seems to be interested in enforcing the antitrust law to protect Google, not to challenge it.“
Up until this point no one had noticed that Hesse seemed to have manipulated her official bio to omit the fact that during her last stint in private practice she had worked mostly as outside counsel to Google to head off numerous antitrust actions and investigations at the state and federal level. Other juicy details emerged. It was revealed in Texas Hesse worked hand in hand with Ted Cruz to lobby the state government on Google’s behalf. That is quite a thing to leave out of your bio. Especially in the antitrust division. Hesse for some reason knew she had to downplay this. Why?
Meanwhile songwriters (and privately many licensees that were not Google) began to loudly complain how disruptive this new rule would be to the entire music licensing ecosystem. For one, songwriters were quick to inform the DOJ that much of their repertoire was subject to private co-administration contracts, and the rule would require them to violate those contracts. The response from Hesse’s antitrust division was stunning. They instructed songwriters to renegotiate private contracts or remove the songs from the repertoire of BMI and ASCAP to comply with the new rules.
The consent decrees that the DOJ imposed on songwriters are ridiculous and need to go away. However there is one good argument for them as they provide a great degree of market efficiency. The consent decrees force BMI, ASCAP, to license their songwriters entire repertoire. This in turn influences the other two songwriter organizations to license their entire repertoire as well. These are called “blanket licenses.” Thus a radio station need only obtain four licenses to enable it to freely play any song. But removing thousands if not millions of songs from the BMI and ASCAP blanket licenses would require a radio station to enter into thousands if not millions of contracts to have the same freedom to play whatever they want. This change would completely undermine the entire rationale for the DOJ to regulate music licensing in the first place. Almost everyone involved on the songwriter side (as well as many licensees) became convinced this rule change was designed to help Google. This is stunning corruption. The entire DOJ antitrust division was being used to benefit a single company. A company that one could argue is/was involved in anti-competitive monopoly.
Around this time BMI and then Songwriters of North America (SONA) a songwriter advocacy group sued the DOJ. Essentially the lawsuits argued the federal government was forcing songwriters to violate private contracts or retroactively make previously legal activity illegal. (Ex post facto lawmaking is prohibited by the constitution.) Instead of backing down Hesse’s antitrust division responded with a new and dangerously unhinged claim: The consent decrees always required 100 percent licensing so songwriter fractional licensing contracts between songwriters were always illegal. This despite the fact the consent decrees never required 100 percent licensing and in case after case BMI and ASCAP were required by DOJ to license fractionally. But most embarrassingly as we noted at the time:
“If 100% licensing already existed why did the DOJ spend the last year asking for comments from songwriters, publishers and music services on whether to make this change or not?
It was a clown show. At this point several members of congress began to poke around in the matter. One congressman asked a different federal agency, The Copyright Office to weigh in on the matter. This was precisely because Hesse had wrecked the reputation of the entire antitrust division of the DOJ. And it smelled like corruption.
Eventually Hesse left the antitrust division, but she didn’t settle the cases before she left. She left the cases to drag on. I suspect out of spite. How many millions of dollars did these cases cost taxpayers and songwriters? I’ve always thought Hesse should have been investigated, if not for corruption then at least for incompetence.
It will be a very sad day if Biden appoints Hesse to oversee the antitrust division. 80 million Americans didn’t vote for Biden because he promised to put a Google attorney in charge of Antitrust at DOJ.