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.