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Lawsuit Accuses CD Distributors, Retailers Of Overcharging Consumers
The State Attorneys General of 30 states and U.S. commonwealths filed on Tuesday (8/8) a massive federal lawsuit claiming that the five major record companies and several large music retailers had conspired to overcharge consumers for CDs, costing consumers hundreds of millions of dollars. The suit seeks damages from Capitol Records, Sony Music, BMG Music, Universal Music and Warner Music, as well as a number of large retailers, including Musicland, Sam Goody and Tower Records.
The amount of damages being sought is not specified in the suit. New York State Attorney General Eliot Spitzer, on behalf of the State Attorneys General, filed the suit in a U.S. Federal District Court in New York City, according to a statement issued by Spitzer's office. In the suit, the State Attorneys General claim that illegal agreements between the labels and the retailers resulted in non-competitive, fixed-minimum CD prices.
"Because of these conspiracies, tens of millions of consumers paid inflated prices to buy CDs," said Spitzer in a statement.
In May, the Federal Trade Commission (FTC)--while settling with the five major record labels a dispute based on allegations identical to those presented in Tuesday's (8/8) lawsuit--estimated that, in the past three years, consumers had paid $480 million more than they should have for CDs.
Echoing the FTC's findings, Tuesday's lawsuit alleges that the five major record companies and music retailers named developed a "minimum advertised price" (MAP) system that forced other discount retailers such as Circuit City, Best Buy and Target, under the threat of stiff financial penalties, to charge a fixed price for CDs.
Plaintiffs in the suit are: New York, Florida, Arizona, Arkansas, Connecticut, Delaware, Hawaii, Illinois, Indiana, Iowa, Kansas, Maryland, Michigan, Mississippi, Missouri, Nevada, New Mexico, North Carolina, the Commonwealth of the Northern Mariana Islands, Oklahoma, the Commonwealth of Pennsylvania, the Commonwealth of Puerto Rico, Rhode Island, South Carolina, Texas, Utah, Vermont, Washington, West Virginia and Wisconsin.
Statements from record company spokespersons offered little insight into the labels’ plans to address the suit. Sony Music Entertainment's Keith McCarthy said only that “Sony Music Entertainment has no comment.”
In a statement issued by BMG, the company defended the MAP practice and seemed confident that the lawsuit would be dismissed. “We still believe that MAP was a legitimate and appropriate practice and we are confident that the courts will reach the same conclusion.”
Universal Music Group spokesman Bob Bernstein also declined to comment on the suit, saying, "We’re not commenting on pending litigation.”
Calls placed to Warner Music and EMI were not returned by press time.
LiveDaily writer Colin Devenish contributed to this story.
