A recent order from Judge Jones in the Eastern District of Pennsylvania provides SESAC some much needed relief, but SESAC still faces a difficult trial. Readers will recall that the RMLC brought Sherman Act claims against SESAC for allegedly anticompetitive behavior. Specifically, the RMLC alleged three violations:: § 1—Horizontal Price Fixing (Count I), § 1—Group Boycott/Refusal to Deal (Count II), and § 2—Monopolization (Count III). In response, SESAC filed a motion to dismiss. Judge Jones threw out the § 1 claims, but denied SESAC’s motion regarding the § 2 (monopolization) claim.
In analyzing SESAC’s motion to dismiss, the court concluded that the RMLC’s “§1 and §2 claims are based on the confluence of four of SESAC’s licensing practices: SESAC’s blanket license (and its refusal to offer other licensing options), its procurement of a critical mass of must-have works, its de facto exclusive dealing contracts with its affiliates and its lack of transparency as to the works in its repertory.” Breaking down the 3 alleged violations, the court looked first at the § 1 claims (price fixing and refusal to deal) and concluded that the RMLC had failed to adequately plead a violation.
A hub-and-spoke conspiracy requires agreements between each spoke and the hub and between and among each of the spokes themselves. Howard Hess Dental Labs., Inc. v. Dentsply Intern., Inc., 602 F.3d 237, 255 (3d Cir. 2010) (“In other words, the ‘rim’ connecting the various ‘spokes’ is missing.”). After reviewing the allegations of agreement and the parties’ respective briefs, the court has concluded that plaintiff has failed to allege sufficient facts from which the court can draw a plausible inference of a hub-and-spoke conspiracy between and among SESAC and its affiliates. In particular, the court agrees with defendants that plaintiff has failed to plead the rim of a hub-and-spoke conspiracy by failing to plausibly allege agreements among SESAC’s affiliates.
Turning next to the § 2 claim (monopoly), the court considered that “Plaintiff alleges that SESAC excludes competitors by obtaining a critical mass of must-have works, selling them exclusively in the blanket license format, discouraging direct licensing by refusing to offer carve-out rights and obscuring the works in its repertory.” The court found the RMLC had “sufficiently pleaded that SESAC’s lack of transparency exacerbates the exclusionary nature of its conduct by forcing radio stations to purchase the SESAC license even if they do not plan to perform the songs in SESAC’s repertory for fear that they may unwittingly air copyrighted content.” Looks like this claim is going to be decided by a jury…
The order is below: