Warner Communications Inc., which includes the Warner, Elektra, and Atlantic labels, has agreed to stop a promotion policy that the Federal Trade Commission (FTC) said involved fixing prices for recordings of the opera stars the Three Tenors — Luciano Pavarotti, Jose Carreras, and Placido Domingo.
The FTC said in a complaint announced today (July 31) that in 1997, the New York-based music giant and subsidiaries of the French company Vivendi Universal S.A. formed a joint venture to distribute recordings of the next every-four-years performance of Pavarotti, Carreras, and Domingo at the World Cup soccer finals. Vivendi Universal is still fighting the charge.
Under the arrangement, Warner was to distribute the recordings in the U.S., while PolyGram Music Group, Vivendi’s predecessor before a merger last year, would handle overseas distribution. But the FTC said its investigation revealed that as a July 1998 Paris concert approached, the two companies feared music lovers wouldn’t like the new CDs, cassettes, and videos as well as those from the trio’s previous World Cup concerts.
Because of this concern, the two agreed not to advertise or discount recordings from the 1990 and 1994 World Cup concerts until over two months after the 1998 version was released, the complaint alleged. It said that agreement violated federal antitrust law.
“Participating in a joint venture is not a license to fix prices on products outside the joint venture,” said Joseph Simmons, director of the FTC’s Bureau of Competition. “This case is particularly troublesome because the companies involved here are large, sophisticated, and should have known better.”
Under a proposed settlement of the charges with the FTC, Warner Communications, a subsidiary of AOL Time Warner Inc., would be barred from entering into agreements with competitors that restrict advertising or fix prices.
A statement from Warner Music Group said the company’s actions were at all times lawful and that the investigation involved just the sale of a single album outside the U.S. over a 10-week period. The company said the decision to settle was made only to avoid lengthy proceedings.
Vivendi still faces a trial by an administrative law judge. “We are very disappointed that the FTC is pursing this issue,” said a statement from Universal Music Group, a Vivendi subsidiary. “We disagree that any unlawful activities occurred and we intend to defend our position.”
Four commissioners voted to accept the proposed consent agreement with Warner and to file the complaint against Vivendi. FTC Chairman Timothy Muris did not participate. The commission will decide Aug. 30 whether to make the settlement final.
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