Music Industry Settles Price-Fixing Lawsuit For US$67.4 Million

by , 11:00 AM EDT, October 1st, 2002

Slashdot reported last night that after two years, a price-fixing lawsuit brought against the major music companies has finally been settled for US$67.4 million. The lawsuit, brought by 43 states and commonwealths of the United States, said that the companies had exchanged subsidized advertising for retailers in return for their agreement not to sell CDs below a certain price, and that the practice had artificially inflated the cost of CDs from 1995 to 2000. A Reuters story indicates that the companies have agreed to cease the practice and also to distribute US$75.7 million of CDs to US organizations, in addition to the cash payout mentioned above. A USA Today story goes into detail:

"This is a landmark settlement to address years of illegal price-fixing," New York Attorney General Eliot Spitzer said in a statement. "Our agreement will provide consumers with substantial refunds and result in the distribution of a wide variety of recordings for use in our schools and communities."

The companies, including Universal Music, Sony Music, Warner Music, Bertelsmann's BMG Music and EMI Group, plus retailers Musicland Stores, Trans World Entertainment and Tower Records, admitted no wrongdoing.

The companies have not practiced the pricing agreement since 2000. At that time, they agreed in settling a complaint by the Federal Trade Commission that they would refrain from MAP pricing for seven years.

Former FTC chairman Robert Pitofsky said at the time that consumers had been overcharged by US$480 million since 1997 and that CD prices would soon drop by as much as US$5 a CD as a result.

In settling the lawsuit, Universal BMG and Warner said they simply wanted to avoid court costs and defended the practice.

"We believe our policies were pro-competitive and geared toward keeping more retailers, large and small, in business," Universal said in a statement.

The cash and goods settlement will be distributed to all 50 of the United States, and consumers may also be able to receive compensation. You can read more about this development at USA Today.

The Mac Observer Spin:

The RIAA and its member labels scream that peer-to-peer file swapping has hurt the sale of CDs, yet here we have yet more evidence that the reality is that the industry has hurt itself far more.

USA Today: States settle CD price-fixing case