Record companies win £41m damages

Oasis CDs are among CD-Wow's cheap imports

Online retailer CD-Wow must pay £41m to British record companies after breaking a deal to stop selling illegally imported cheap albums in the UK.

The High Court in London ruled in March that the site's owners, Music Trading Online, were "in substantial breach" of a 2004 agreement to stop importing CDs.

It has now ordered Hong Kong-based CD-Wow to pay £37m plus interest to the British Phonographic Industry (BPI).

CD-Wow says it will fight the High Court judgement in the European courts.

"We are the little guys selling CDs to the UK market and they (the BPI) have picked on us for that reason," said chief executive Henrik Wesslen.

The courts have lost patience Roz Groome, BPI lawyer

"Other bigger sites doing the same thing have been left alone."

"CD-Wow is no consumer champion," countered the BPI's chief executive, Geoff Taylor, who said the company had undermined "the legitimate businesses of UK retailers and record companies".

"The vibrancy of British music depends on a fair return on the investments that allow British talent to shine.

"This decision is an important step in ensuring that British music has a bright future."

The Entertainment Retailers' Association (Era), which represents companies like HMV, Fopp and Amazon, also welcomed the ruling.

"It is vital that all retailers compete on a level playing field," said director general Kim Bayley. "Illegal imports threaten that level playing field and threaten British jobs."

Frozen assets

CD-Wow delivers top 10 albums for as little as £6.99

With retail sales of £21.7m in the UK in 2005, CD-Wow was the third largest online music retailer in the UK after Amazon and Play.

The company denied deliberately breaking its 2004 court undertaking to stop buying CDs in places like Hong Kong and passing them on to consumers in the UK at discounted prices.

It put any breach of copyright down to human error, but the High Court rejected its argument.

The BPI, which represents the major record labels in the UK, said the ruling was a "significant legal victory" for the music industry.

It said it had already obtained a freezing order against CD-Wow, meaning that all of its assets and bank accounts are frozen.

'Brute force'

"The courts have lost patience," said BPI lawyer Roz Groome, who added the body would use the ruling to pursue other retailers which exploit parallel imports.

In a statement, CD-Wow said the British courts had set a "dangerous precedent".

"I fear what is happening is an attempt to use the combined brute force of the record industry to force the retailers and, in turn, our clients, to keep lining the pockets of the fat cat executives," said Mr Wesslen.

"It shouldn't matter whether we are buying from an official distributor in the UK, Europe or the Far East, what is important is that we are buying legitimate products from the record companies themselves."

The retailer has denied reports it will cease trading following the judgement, and has called for a full review of copyright law.