EMI dismisses price-fixing claim

Too expensive, say US state attorneys

Record company EMI says lawsuits brought against it and four other companies in the US are "without merit" and will be "vigorously defended".

Having initially plummeted, its shares rallied strongly as fears waned over the seriousness of the suits.

Because of these conspiracies, tens of millions of consumers paid inflated prices to buy CDs

Eliot Spitzer, New York State Attorney General

In total, cases have been lodged against 18 major record companies, alleging that they fixed the prices of compact discs over a five-year period.

EMI confirmed that it was among the five biggest companies filed against by 28 US states in connection with the minimum advertised pricing policies operated in the US.

Subsidies

The record companies are accused of fixing prices by subsidising advertising of retailers that agree not to sell CDs below a minimum price set by the labels.

As well as EMI, the attorneys have filed suits against Time Warner's Warner Brothers music group, Sony Music, Universal Music Group and Bertelsmann's BMG Entertainment.

Also in the dock are three large retailers, Tower Records, MusicLand Stores (Sam Goody and Musicland), and Trans World Entertainment (Camelot, Music & Movies, Planet Music, and Record Town).

The states are demanding damages running into "hundreds of millions of dollars", or "several dollars" per CD sold.

The US market for CDs is worth $14bn at wholesale prices.

If US compact discs were indeed overpriced, European consumers may wonder why on average they have to pay even more for their music CDs.

'Conspiracies'

New York State Attorney General Eliot Spitzer spoke of "illegal action" and "conspiracies" that resulted in "tens of millions of consumers [paying] inflated prices to buy CDs".

State officials allege that the so-called "minimum advertised pricing" policy violates anti-trust laws and drove up CD prices.

It was first introduced when large retailers like Wal-Mart and Circuit City began to sell CDs of top artists as "loss leaders" below costs, in an attempt to lure customers into their shops.

In May, the five record companies named in the lawsuit agreed to suspend the minimum pricing policy for seven years, in a deal with the US Federal Trade Commission.

Back then, none of the labels admitted any wrong-doing, nor did they agree to pay any damages.

But the Federal Trade Commission estimated that consumers had lost out to the tune of $480m.

The labels argue that their policy simply was an attempt to help small record stores that could not compete with their bigger rivals.

State attorneys, however, say music stores could lose advertising funds worth millions of dollars if they advertised CDs for less than the agreed minimum.

The states and territories participating in the lawsuit are New York, Florida, Arizona, Arkansas, Connecticut, Delaware, Hawaii, Illinois, Indiana, Iowa, Kansas, Maryland, Michigan, Mississippi, Missouri, Nevada, New Mexico, North Carolina, Northern Mariana Islands, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Texas, Utah, Vermont, Washington, West Virginia and Wisconsin.