CD Price Fixing Suit Settled For $143 Million

Attorneys general in 41 states and three U.S. commonwealths yesterday (Sept. 30) announced a $143 million settlement of price-fixing charges against the five major U.S. distributors and retailers Tran

Attorneys general in 41 states and three U.S. commonwealths yesterday (Sept. 30) announced a $143 million settlement of price-fixing charges against the five major U.S. distributors and retailers Trans World Entertainment, Tower Records, and Musicland Stores, Billboard Bulletin reports.

In an anti-trust lawsuit filed in August 2000 in federal court, the states charged that the companies from 1995-2000 had conspired to inflate the price of CDs, costing consumers millions of dollars. The suit claimed that the majors and retailers illegally used minimum advertised pricing (MAP) policies to raise CD prices; this resulted in a reduction of discounting and competition among music retailers, the suit says.

In the settlement agreement, the distributors admit no wrongdoing. Universal Music & Video Distribution (UMVD), BMG Distribution, WEA, and EMI Distribution (EMD) issued statements saying they believe MAP policies were legal but that protracted litigation would be prohibitively expensive. Tower and Trans World also contend their innocence but say they too wished to avoid costly litigation. Sony Music Distribution and Musicland had no comment.

Under the settlement, $67.38 million in cash will be distributed to the settling states. This will be used to compensate consumers who overpaid for CDs during the 1995-2000 period, as well as to pay settlement administration costs and attorneys' fees. In addition, 5.5 million CDs, valued at $75.7 million, will be distributed to public entities and nonprofit organizations in each state to benefit consumers and promote music programs. According to the agreement, the companies will pay artist royalties on the CDs.

Insiders say UMVD's cash payout will be approximately $18.8 million, followed by $13.65 million for WEA, $12.7 million for BMG, $12.5 million for Sony, and $6.5 million for EMD. The retailer defendants together are to pay just over $3 million.

The Federal Trade Commission (FTC) brought a separate action against the distributor defendants that was resolved in May 2000 with decrees requiring the parties to cease using MAP policies. The FTC did not obtain monetary relief and did not address price-fixing among retailers.