5 Largest Record Labels Accused of Fixing CD Prices

Twenty-eight states filed suit Tuesday against the world’s five largest record labels, accusing them of fixing the prices of compact discs and demanding hundreds of millions of dollars in damages.

The suit, filed in U.S. District Court for the Southern District of New York, concerns a policy called “minimum advertised pricing,” or MAP, in which the labels subsidized advertising for retailers that agreed not to market CDs below a minimum price determined by the labels.

New York state Atty. Gen. Eliot Spitzer said in a statement, “This illegal action . . . has not been music to the ears of the public. Because of these conspiracies, tens of millions of consumers paid inflated prices to buy CDs.”

The suit alleges that the MAP policy increased CD prices in violation of state and federal antitrust law, kept CD prices artificially high and penalized retailers who did not participate.

The five labels are Time Warner Inc.’s Warner Bros. music group; Sony Corp.’s Sony Music Entertainment; Seagram Co.’s Universal Music Group; BMG, the music unit of Bertelsmann; and EMI Group.

Also named as defendants are three retailers: MusicLand Stores Corp., Tower Records and Trans World Entertainment Corp.

Spitzer told a news conference the states are still calculating the amount of damages, but said they amounted to “hundreds of millions of dollars.”

In a settlement with the Federal Trade Commission announced in May, the five labels agreed to ban MAP for seven years. The settlement did not require the labels to pay damages, nor did the labels admit any wrongdoing.