FTC Gives Music Teachers a Regulatory Nudge

The FTC had been looking into allegations that the Music Teachers National Association (MTNA) had violated Federal anti-trust regulations.

These alleged violations came in the form of the MTNA’s Code of Ethics, which the FTC asserted encouraged the organization’s 22,000 or so members “not to actively recruit students from another studio” and to “respect the integrity of other teachers’ studios.” This amounted, the FTC maintained, to restraint of trade, in the form of reduced competition for the services that the members provide.

There was more. According to the FTC, MTNA had further established a process for resolving disputes under its Code of Ethics that included private dispute resolution and sanctions for violations.  The FTC also found that a number of MTNA affiliate organizations had adopted restrictions on advertising, charging less than the community average, or offering scholarships or free lessons. 

A Change of Codes

The settlement between the MTNA and the FTC, reached last December and formally issued in April in an FTC Decision and Order document, required the MTNA to change its Code of Ethics to eliminate the challenged provisions and to notify members or affiliate organizations of this action, as well as provide in-person antitrust compliance training for five years. 

The MTNA settlement also prohibits it from affiliating with any organization that restricts student or job solicitations, advertising, or price competition, and further requires potential affiliates to certify its compliance.

The MTNA wasn’t happy about the ruling, and stated that it agreed to it to avoid spending membership funds defending itself and compelling local and regional affiliates with far fewer resources than the national organization to do the same.

“Although MTNA demonstrated to the FTC that its code of ethics is voluntary and that the Association has never enforced the solicitation provision, the FTC offered MTNA the unappetizing choice of entering into a settlement or spending hundreds of thousands of membership dues dollars fighting the federal government,” the organization wrote on its website.

It later posted a revised Code of Ethics there, where it also published an antitrust guide for members, reminding them of topics that they are prohibited from discussing amongst themselves, including current prices or hourly rates, plans to increase or decrease prices or hourly rates, agreements to allocate or divide territories or clients, and recommendations to members to implement unlawful tying arrangements such as requiring students to purchase sheet music exclusively from the teacher.

Arguments Both Ways

What the FTC’s actions revealed is something we already knew _ that teaching guitar or piano is a huge industry of one-man bands, each trying to build a reputation and a following in a crowded field. It can be easy to forget that what looks like a cottage craft from ground level becomes industrial when looked at from above, which is the perch from which regulators scrutinize it.

It’s of particular importance for retailers to keep this in mind for their own educational programs, which are largely made up of those freelance educators. It’s a healthy symbiosis: music teachers using the store’s premises go a long way towards building lasting customer relationships for the store while the retailer lends the instructor credibility and an inviting environment in which to teach.

But while the process of teaching and scheduling students seems quotidian enough, what goes on between teachers trying to better leverage their positions, or between teachers and store owners looking to solidify a territory, could have unintended consequences.

Music education is understandably a cornerstone for the larger music industry. It’s where the musicians and the customers of the next generation come from. Music teachers, whether in an academy or the back of the shop, have to maintain standards across the board – musically, professionally, and economically – and store owners need to support them in that. It’s also understandable that there is a view of regulatory overreach here, of governmental intrusion into an organically running market doing what comes naturally.

The issue was debated on Pianoworld.com under the rubric “Music teachers, beware – feds are on to you [!]” The Wall Street Journal’s editorial, which contexted its comments on the matter with references to the Department of Justice’s notorious pursuit of Gibson Guitars for its choice of wood sources, called the FTC’s actions “ludicrous” and judged the consent decree “an abuse of power.” That’s the balance that is the hardest to achieve and maintain in a capitalist democracy, and that’s not going to change anytime soon.