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January 2021: Victory for SoundCloud and Streaming Music

January 2021

Quinn Emanuel recently secured the dismissal of all claims against SoundCloud Inc. (“SoundCloud”)—a groundbreaking music streaming service—in a sprawling antitrust lawsuit in the District of Connecticut.

In March 2020, a performing rights organization (“PRO”) called Pro Music Rights (“PMR”) filed an antitrust complaint against SoundCloud and numerous other companies, including Amazon, Apple, Google, Pandora, Spotify, and YouTube. PMR alleged that Defendants had conspired to drive PMR out of business by refusing to license any works to which PMR held the copyrights, and instead had agreed to do business only with incumbent PROs such as ASCAP and BMI. According to PMR, the conspiracy was hatched at a series of trade meetings and industry events, and propped up an anticompetitive market structure that harmed both consumers and new-entrant PROs like PMR. Based on these allegations, PMR brought three sets of claims: (i) conspiracy claims under Section 1 of the Sherman Act; (ii) monopsonization and attempted monopsonization claims under Section 2 of the Sherman Act; and (iii) state-law claims for unfair competition.

Although several Defendants agreed to settle PMR’s claims, SoundCloud did not. Instead, Quinn Emanuel and counsel for the other non-settling Defendants pursued a two-fold strategy.

First, the firm successfully obtained a stay of discovery pending a motion to dismiss, which staved off the threat of costly antitrust discovery, and prevented PMR from garnering additional materials to support its claims. Second, the firm moved to dismiss on the grounds that all of PMR’s claims were conclusory, implausible, and suffered from myriad other pleading defects.

On December 16, 2020, the Court issued a detailed opinion granting Defendants’ motion to dismiss. See Pro Music Rights, LLC v. Apple, Inc., 2020 WL 7406062, at *1 (D. Conn. Dec. 16, 2020). Regarding PMR’s Section 1 conspiracy claims, the Court found that, among other problems, PMR’s own complaint “suggest[ed] wholly innocent reasons for defendants to decline to do business with PMR,” negating any inference of a conspiracy. Id. at *4. Regarding PMR’s Section 2 monopsonization claims, the Court found that PMR both relied on a legally invalid “shared monopsony theory” and had failed to plead a plausible relevant product market, as required under the antitrust laws. Id. at *9. The Court then found that the state-law claims, which were largely derivative of PMR’s federal antitrust claims, failed for essentially the same reasons. Id. at *10-11. Although the Court declined to dismiss PMR’s claims with prejudice, the Court warned PMR to file an amended complaint only if it had “good faith grounds” to do so. Id. at *11.

The Court’s decision in Pro Music Rights is an important reminder that federal courts will not hesitate to dismiss antitrust claims at the pleading stage unless the plaintiff provides sufficiently detailed allegations supporting an inference of unlawful conduct. Buzzwords and innuendo about secret meetings are not enough, even if packaged in a lengthy complaint. The Court’s decision also underscores the tradeoffs antitrust defendants face in determining whether to pursue early settlements. In this case, several Defendants settled early—presumably due to the potential risks of becoming embroiled in protracted antitrust discovery—only to have the case dismissed shortly afterwards. Defense-side antitrust lawyers should thus carefully consider whether pursuing a premotion-to-dismiss settlement is truly worth the risk of subsidizing weak antitrust claims, as appears to have been the case here.