Broadcast Music Inc. v. CBS
Citation: 441 U.S. 1 (Supreme Court, 1979)
Facts
CBS sued BMI and ASCAP, arguing that their practice of issuing blanket licenses — granting access to entire catalogs of copyrighted music for a flat fee — constituted horizontal price fixing in violation of Sherman Act § 1. The blanket license was issued collectively by the performing rights organizations on behalf of thousands of individual composers and publishers who could not practically negotiate individually with broadcasters.
Issue
Whether the issuance of blanket licenses at a uniform price by a performing rights organization constitutes per se illegal price fixing under Sherman Act § 1.
Holding
No. The Supreme Court reversed the Second Circuit and held that the blanket license is not per se price fixing and must instead be analyzed under the rule of reason. The Court remanded for a full rule of reason analysis.
Rule
Not every agreement that involves a price term is per se price fixing. Where an arrangement integrates the productive activities of many parties, creates a new product with significant efficiencies, and serves a pro-competitive purpose that could not easily be achieved through other means, the agreement is analyzed under the rule of reason rather than treated as per se illegal. A “quick look” or full rule of reason inquiry is appropriate when the practice has plausible efficiency justifications.
Significance
BMI v. CBS is essential for understanding the limits of the per se rule and the distinction between naked and ancillary restraints. The case demonstrates that courts must first ask whether an arrangement is truly comparable to per se illegal conduct before applying the per se label — some apparent price agreements are in fact new, pro-competitive products. It anchors the concept of ancillary restraints that are reasonably necessary to a legitimate joint venture.