Inquiry into CD sales

Government focuses on cheap CDs from Europe

The world's top record companies are being investigated as to whether they tried to stop cheap imports of compact discs reaching the UK.

The Office of Fair Trading (OFT), a government watchdog, said that it had, "reasonable grounds for suspecting that record companies had taken concerted action to limit the parallel importing of CDs".

The companies under investigation are Sony, Universal Music UK, EMI, Bertelsmann Music Group, Warner Music, Virgin and Pinnacle Records, the UK's largest independent record distributor.

The OFT stressed there was no indication yet of a breach of the Competition Act.

Music industry reaction

The inquiry surprises me. Prices are cheaper than they have ever been in the UK.

Cliff Dane, Chairman of Media Research Publishing

The labels under investigation, contacted by BBC News Online, said it was too early to comment, but Pinnacle Records express surprise that they were the subject of an inquiry.

The British Phonographic Industry, which represents 250 UK record labels, said in a statement that the competitive nature of the industry was recognised by a Mergers and Monopolies Commission report in 1994.

"The inquiry surprises me", said Cliff Dane, Chairman of research group Media Research Publishing.

"Prices are cheaper than they have ever been in the UK. Grey imports have been a big problem for UK labels. What they've been doing is releasing special CDs with songs the European version don't have to make people buy the UK product."

The European Commission recently launched its own inquiry into possible price collusion in Europe by the five largest music labels.

The companies have until 23 February to respond and the inquiry is expected to last six months.