Traditional music retailers, trying to retain their share of the record business as Internet sales increase, are beginning to join forces against major record distributors. The latest salvo from retailers comes from the British discount chain Virgin Our Price, which has announced that it won't pay the bills it owes to record distributors unless the distributors address its concerns.

Virgin Our Price, the second-largest record chain in the U.K., announced Tuesday (2/1) that if distributors don't assure the retailer something better than the current 30 percent margin on recorded music, the stores will quit the music retailing business without paying the distributors, according to British press reports.

Retailers have been on the offensive since the announcement that EMI and Warner Music Group, two of the largest record distribution companies, intend to merge, which would reduce the number of major label groups from five to four.

Traditional retailers fear that the merger gives an enormous catalog of music to a company that has the ability to sell music through its own channels--especially in light of Time Warner's planned merger with America Online.

On another front, The National Association of Recording Merchandisers, which claims to represent more than 1,000 music retailing companies, has filed suit in the U.S. District Court for the District of Columbia against Sony Music Entertainment, another major music distribution arm. NARM charges that Sony is engaging in unfair competition by including promotional material for its online stores--such as printed inserts and hyperlinks to Sony-owned Internet shopping sites--along with its CDs. Among other complaints, NARM alleges that Sony engaged in illegal price discrimination by favoring Sony-owned CDNow/Columbia House over other retailers.

"Retailers have been complaining to Sony since early last year about the practice of using hyperlinks on CDs to divert retail customers to its own retail sites, but the complaints have fallen on deaf ears,'' NARM president Pamela Horovitz said in a statement.

Just five record label distribution groups accounted for nearly 84% of the albums sold in the U.S. in 1999. The Universal Music Group was the top album distributor with a 26.4% share of the market, according to SoundScan. In second place was Sony's distribution arm, with a 16.2% market share. The Bertelsmann Music Group logged 16% share, while the Warner distribution group had a 15.7% share. EMI Music Distribution held a 9.5 share in 1999.

Though there have been several reports that BMG and Sony have been in merger discussions, officials at BMG parent company Bertelsman AG and Sony both denied this week that a deal is in the works.