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Over

half of the States

in North America have filed suit against 5 of the worlds largest

record labels, accusing them of price fixing. 28 States filed

suit in U.S. District Court For The Southern District Of New York.

The suit centers on a policy called “minimum advertised pricing”

(MAP), under which the labels subsidized advertising for retailers

that agreed not to sell CD’s below a minimum price determined

by the labels. New York State Attorney General Eliot Spitzer said

in a statement, “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 CD’s…”

The suit alleges that

the MAP policy increased CD prices in violation of state and federal

antitrust law, kept CD prices artificially high, and penalized

retailers who did not participate. The five labels are Time Warner

Inc.’s Warner Brothers music group; Sony Corp.’s Sony Music Entertainment;

Seagram Co.’s Universal Music Group; BMG, the music unit of Bertelsmann

AG , and EMI Group Plc. Also named as defendants were three retailers:

MusicLand Stores Corp, Tower Records, and Trans World Entertainment

Corp (TWEC). MAP policy originated in the mid-1990s when large

department stores and consumer electronics retailers began selling

CD’s below cost as a “loss leader,” in an effort to get people

into the stores to buy big-ticket items.

The labels say they

started the MAP policy in an effort to help smaller music retailers

compete with chains such as Wal-Mart Stores Inc. and Circuit City

Stores Inc. They say smaller retailers do not have the option

of offsetting losses from cut-price CD sales with sales of other

products. The labels say they received no financial gain from

the MAP policy. These are the labels that Hillary Rosen and The

RIAA represent in their crusade against music on the internet.