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NEW YORK -- Twenty-eight states, including Hawaii, filed suit today accusing the world's five largest record labels and three large music retailers of fixing prices of compact discs. The states are seeking "hundreds of millions of dollars" in damages. Hawaii joins music
price-fixing suitFrom staff and wire reports
The suit, filed in U.S. District Court for the Southern District of New York, centers on a policy called "minimum advertised pricing", or MAP, under which the labels subsidized advertising for retailers that agreed not to sell CDs below a minimum price determined by the labels.
New York State Attorney General Eliot Spitzer said in a statement, "This illegal action . . . has not been music to the ears of the public. Because of these conspiracies, tens of millions of consumers paid inflated prices to buy CDs."
The suit alleges that the MAP policy increased CD prices in violation of state and federal antitrust law, kept CD prices artificially high, and penalized retailers who did not participate.
"Assuming the allegations are true, Hawaii consumers were damaged -- were hurt -- and we're joining in the effort to gather damages for them," said Jack Rosenzweig, Hawaii's deputy attorney general.
He said the state of Hawaii is taking a back-seat role in the case, while a group of bigger states has taken on most of the prosecution efforts -- typical of multi-state cases. "To be be quite frank, we're sort of going for the ride now," Rosenzweig said today.
The five labels are Time Warner Inc.'s Warner Brothers music group; Sony Corp.'s Sony Music Entertainment; Seagram Co.'s Universal Music Group; BMG, the music unit of Bertelsmann AG, and EMI Group Plc. Also named as defendants were three retailers: MusicLand Stores Corp., which owns the Sam Goody chain of stores, Trans World Entertainment Corp., which owns the Camelot Music chain, and Tower Records. Spitzer told a press conference the states were still calculating the amount of the damages but said they would come to "hundreds of millions of dollars," or "several dollars per CD."
A Warner Music Group spokesman said the suit has no merit. "We continue to believe that MAP served a valid business purpose and benefited consumers by substantially furthering retail competition and that it was an appropriate and lawful practice."
His statement was echoed by a BMG spokesman, who called the practice "legitimate and appropriate and we are confident that the courts will reach the same conclusion."