Record labels sued in America for CD price fixing

The EMI Group and Tower Records are among five of the world's biggest record labels being sued in a joint action by 28 American states for fixing prices of compact discs.

The EMI Group and Tower Records are among five of the world's biggest record labels being sued in a joint action by 28 American states for fixing prices of compact discs.

The lawsuit, filed in New York, centres on a policy called "minimum advertised pricing" (Map), through which the record labels subsidised advertising for retailers who agreed not to sell CDs below a minimum price set by the labels.

The states allege that the Map policy increased CD prices in violation of existing laws, kept CD prices artificially high and penalised retailers who did not take part.

"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," said Eliot Spitzer, the New York State attorney general .

The five labels accused are Warner Brothers music group, Sony Music Entertainment, Universal Music Group, BMG (the music arm of Bertelsmann AG) and EMI Group Plc. Also named as defendants were the music retailers Tower Records, MusicLand Stores Corp and Trans World Entertainment.

No one was available at either the EMI Group or Tower Records in London to comment.

Last month the British Government abandoned a threat to force the music industry to reduce the prices of CDs even though consumers in the UK pay up to one-third more than those in other countries.

The decision by Stephen Byers, the Secretary of State for Trade and Industry, to take no action over allegations of price-fixing was made despite a survey by his department that found British consumers paid 29 per cent more for CDs than those in the US and 14 per cent more than in France.

The contentious Map policy began five years ago when large stores started selling CDs below cost as a "loss leader" in an effort to get more customers through their doors.

The labels say they began the policy in an effort to help smaller music retailers compete with the bigger chains, such as Wal-Mart, which owns Asda. They claim smaller retailers cannot afford to offset losses from cut-price CDs.

But they also claim that they received no financial gain from the Map policy. "The wholesale price we charged retailers was the same whether or not they participated in Map," one record label executive told Reuters.

In May, the five labels agreed to ban the Map policy for seven years, in a settlement with the US Federal Trade Commission.