Major record labels sued in USA by states
"This illegal action by record companies and retailers has not been music to the ears of the public," said New York State Attorney General Eliot Spitzer in an official press release. "Because of these conspiracies, tens of millions of consumers paid inflated prices to buy CDs of artists including Santana, Whitney Houston, Madonna and Eric Clapton." The alleged conspiracy is one of anti-competitive trading, by increasing the price of CDs and reducing retail competition. Under a policy known as Minimum Advertised Pricing (MAP), labels subsidized advertising for retailers that agreed not to sell CDs below a price set by the labels. The suit claims MAP effectively kept CD prices artificially high and penalized retailers who did not participate. The labels claim that MAP was started in order to assist smaller music retailers compete with large stores and retail chains, who sold CDs below cost in order to attract more customers into their stores. Filed in U.S. District Court for the Southern District of New York, the suit seeks damages from Warner Music Group, Sony Music Entertainment; Universal Music Group, BMG and EMI Group PLC. Retailers such as Musicland Stores Corp. and Tower Records were also named. The plaintiffs are Arizona, Arkansas, Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Maryland, Michigan, Mississippi, Missouri, Nevada, New Mexico, New York, North Carolina, Northern Mariana Islands, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Texas, Utah, Vermont, Washington, West Virginia and Wisconsin. The states have not decided how much money they will claim in damages. Following a settlement with the US Federal Trade Commission (FTC) in May 2000 the labels agreed to ban MAP policy for seven years. But the labels were not required to pay any damages. According to the FTC, the five companies currently distribute 85 percent of the music CDs sold in the United States, worth up to $15 billion in sales last year. Recommended links:
States Sue Music Labels for Price Fixing
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States: Labels Fixed CD Prices
U.S. States charge Big Music with price-fixing
States target record labels with price-fixing suit
FTC slams record labels on CD sales practices
New York Attorney General's press release on lawsuit
States Sue Record Companies For Price Fixing
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