Warner Settles FTC Price-Fixing Charges

Warner Communications Inc. has agreed to halt a promotion policy that, according to the Federal Trade Commission, involved price fixing for audio and video albums of the Three Tenors opera stars.

The commission said in a complaint announced Tuesday that Warner collaborated with subsidiaries of the French company Vivendi Universal to raise prices for the recordings. Although Warner agreed to a consent order without admitting wrongdoing, the French firm is contesting the charges and will face trial by an administrative law judge.

According to the FTC, Warner and PolyGram, the predecessor to Vivendi Universal, formed a joint venture in 1997 to distribute compact discs, cassettes, videocassettes and videodiscs to be produced from the next public performance of tenors Luciano Pavarotti, Jose Carreras and Placido Domingo at the World Cup soccer finals.

Warner was to distribute the recordings in the United States, and Vivendi would handle overseas distribution, the FTC said. Warner and Vivendi are two of the world’s largest music distribution companies.

As a July 1998 concert approached, according to FTC investigators, the companies feared their customers would not like the new products as well as those from the trio’s previous World Cup concerts. So the firms agreed not to advertise or discount recordings from the 1990 and 1994 soccer concerts until more than two months after the 1998 recordings were released, the FTC said.

“Participation in a joint venture is not a license to fix prices on products outside the joint venture,” said Joseph Simons, director of the FTC’s bureau of competition, who said the agreement violated federal law.

Under the proposed settlement, which is scheduled to become final Aug. 30, Warner Communications, a subsidiary of AOL Time Warner Inc., would be barred from entering into agreements with competitors that restrict advertising or fix prices.

New York-based Warner Music Group said in a statement that its decision to settle was made only to avoid lengthy legal proceedings. It said its actions were lawful at all times and that the FTC’s investigation was limited to sale of a single album outside the United States over a two-month period.

“We are very disappointed that the FTC is pursuing this issue,” said Bob Bernstein, spokesman for Universal Music Group. “We disagree that any unlawful activities occurred and we intend to defend our position.”

According to the FTC complaint, the Three Tenors have come together every four years since 1990 at the site of the soccer finals for a combination live concert and recording session.