Record Store Group Takes Sony Music to Court

A group representing thousands of record stores on Monday sued Sony Music Entertainment for allegedly forcing retailers to sell CDs that drive consumers to Sony’s online stores.

The lawsuit comes as the music industry is struggling with rapid changes in distribution and marketing fueled by digital technology. Giant entertainment companies like Sony are seeking to protect their ownership rights from online pirates while building their own plans to sell music over the Internet to compete against traditional retailers.

The National Assn. of Recording Merchandisers, which represents more than 1,000 retail music companies, filed suit in U.S. District Court in Washington charging that Sony illegally forces retailers to carry compact discs with software and promotional inserts directing consumers to competing retail locations owned or operated by Sony.

The complaint also alleges that Sony has engaged in copyright misuse and illegal price discrimination by favoring its own record club, Columbia House, and its online music retailer, CDNow Inc., over other retailers, as well as unfair competition and false advertising.

CDNow is set to merge with Columbia House, a joint venture between Sony and Time Warner Inc.

“Retailers have been complaining to Sony since early last year about the practice of using hyperlinks on CDs to divert retail customers to its own retail sites, but the complaints have fallen on deaf ears,” NARM President Pamela Horovitz said in a news release.

She said NARM is looking into practices by all of the major record companies, including Warner Music, Seagram Co.’s Universal Music, BMG and EMI Group.