EU Commissioners Investigating CD Price-Fixing

Price-fixing by major record labels isn't confined to the United States. The music industry's "Big Five" (Universal Music, Sony Music Entertainment, Warner Music Group, EMI Group PLC, and the Bertelsmann Music Group) are now under the scrutiny of European Union antitrust investigators, who are looking into the possibility that the companies may have colluded to keep CD prices artificially high in Europe. The Federal Trade Commission (FTC) and music industry agreed to settle the American version of the issue in May 2000.

Contracts between music companies and European retailers are under scrutiny because of suspicions that the world's largest music publishers may have tacitly agreed to keep prices high, according to European Commission spokeswoman Amelia Torres. Europe has some of the world's highest prices for recorded music, in part because of high taxes, but also because competition on price is discouraged. The inquiry is said to be in a "very early stage," according to Torres. "We have no evidence whatsoever that the companies are guilty of anti-competitive practices in Europe," she stated, but EU spokesman Jonathan Faull acknowledged that the European music market is "oligopolistic . . . dominated by a few producers."

The music labels could face massive fines if investigators determine a pattern of price-fixing. Retailers, including five who sell compact discs over the Internet, have been asked to submit their purchasing records to the EC. The investigation could stretch out as long as two years, according to reports from Europe in late January. The inquest was initiated in the wake of a similar probe in the US, which led to an industry-wide agreement to halt "minimum advertised price" (MAP) programs that coerced retailers into selling CDs at predetermined levels in exchange for advertising subsidies.

The FTC settlement presaged lawsuits by the attorneys general of more than 30 states against the record labels, as well as a number of class-action suits brought by private attorneys.