Monopolies Commission to investigate price of CDs

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The Independent Online
THE PRICE of compact discs is to be investigated by the Monopolies and Mergers Commission. It is a nine-month inquiry likely to encompass the entire British music industry.

Sir Bryan Carsberg, director- general of Fair Trading, will announce the investigation this week when the Commons National Heritage Select Committee publishes what is expected to be a highly critical report on CD prices. The Independent on Sunday has been campaigning for cheaper CDs since January 1992. CDs in Britain, at pounds 12-14, cost 50 per cent more than in America.

Sir Bryan is to ask the MMC in particular to look at whether copyright laws and restrictions on cheap US imports create 'a complex monopoly' and artificially inflate CD prices.

In April 1992, following a 15- month inquiry, the Office of Fair Trading reported that the price difference between CDs and cassettes 'could not be explained by higher production costs or higher handling and selling costs'. But the case was not referred to the MMC because there was insufficient evidence of collusion between manufacturers and retailers.

Inquiries reopened last July following Sir Bryan's appointment and a string of complaints from consumers.

At its recent inquiry into CD prices, members of the National Heritage Select Committee heard evidence from manufacturers, retailers and other interested parties. The managers of the best- selling bands Dire Straits and Simply Red, the director of the Consumers Association and executives of the W H Smith group called on record companies to cut wholesale prices by pounds 2.

W H Smith, which owns Our Price and has a half-share in the Virgin Megastore record shops, pledged to pass on in full any reduction to the customer.

But record company executives deny that CDs are over-priced. The industry is further incensed by the prospect of an MMC inquiry which, it believes, could undermine one of Britain's most successful export earners.

Supporters of the campaign for lower CD prices, including Gerald Kaufman, the committee's Labour chairman, believe that an MMC investigation is long overdue.