Suit Says CD Makers Kept Prices High

The nation’s six largest makers of compact discs have been accused of scheming to keep CD prices artificially high, in a lawsuit that could result in payments to millions of buyers.

A law firm representing two CD buyers filed the lawsuit Monday and won immediate class-action status, which means other aggrieved CD consumers can join. The suit does not specify how much it is seeking but limits each individual claim to $5,000.

The suit alleges the companies propped up retail CD prices, even though refinements in manufacturing and other improvements have cut the cost of making a CD from $3 in 1983 to less than $1 now.

“The six defendants have employed a variety of collusive schemes to maintain and increase profit margins on their sales of CDs,” the lawsuit says. It was filed on behalf of anyone who bought CDs from any of the six companies after June 26, 1992.

The companies include EMI Music Distribution, a subsidiary of Britain’s Thorn/EMI; Sony Music Entertainment, a subsidiary of Sony Corp. of Japan; Warner Elektra Atlantic Corp., a unit of Time Warner Inc.; and UNI Distribution Corp., a unit of MCA Music Entertainment Group.

Also listed are Bertelsmann Music Group, a unit of Germany’s Bertelsmann Inc., and PolyGram Group Distributors, a subsidiary of Philips Electronics of the Netherlands.

“We believe that suit is wholly without merit, and beyond that we do not comment on matters involving litigation,” said Dennis Petroskey, a spokesman for Bertelsmann.

A spokeswoman for Sony and PolyGram and a spokesman for Time Warner said their companies had not seen the lawsuit so they could not immediately comment. The other companies did not immediately respond to requests for comment.

The lawsuit was filed by Knoxville attorney Gordon Ball in nearby Blount County Circuit Court on behalf of CD buyers Chris Robinson and George Silvey. It has been certified as a class action in 14 states, including California, and the District of Columbia.

Although consumers don’t buy CDs directly from manufacturers, the suit argues that the manufacturers strong-armed retailers into keeping prices high. The mechanism for that, according to the lawsuit, is a “minimum-advertised-price” policy.

The MAP prices of the six defendants were virtually identical, ranging from $11.81 to $11.88 for a CD with a retail price of $16.98, the suit says. It contends the manufacturers kept retailers in line by suspending some advertising assistance or severing relationships.