Tesco has flatly denied a published report which claimed the British mass merchant powerhouse is applying pressure on labels to drop their wholesale CD prices.

"It's a load of nonsense. I don't know where they're getting it from," comments a Tesco spokesman on the story, which was first published in the Financial Mail newspaper. Well-placed label sources back Tesco's response. Executives who spoke with Billboard.biz say recent discussions with Tesco have not touched on the topic of reduced dealer rates.

According to the report, sources told the newspaper that Tesco was maneuvering a reduction in dealer prices which would see labels earn up to a third less on each CD sale.

The industry has something of a love-hate relationship with the supermarkets, which tend to view music with a "stack them high, knock them out cheap" attitude. Specialist retailers have long argued that the likes of Tesco, Asda and Woolworths use music as a loss leader, forgoing their margins on CDs in the hope of pulling footfall -- and profits -- from groceries and other goods.

Tesco, which is a member of the Entertainment Retail Association, accounted for 12.7% of U.K. record buyers' albums expenditure in 2006, according to labels body the BPI. ERA's recently-published statistical yearbook does not break out the performance of individual retailers.