United Kingdom Begins Inquiry into CD Pricing

Major music companies may have conspired to keep CD prices artificially high in the United Kingdom by limiting cheaper imports. That's the presumption behind an inquiry launched February 9 by the British government's Office of Fair Trade.

The OFT believes that the big labels may have "taken concerted action to limit the parallel importing of CDs into the UK from other (European Union) member states," according to a news story appearing in the February 10 edition of The Guardian newspaper. The OFT has officially requested information from seven music companies: Sony Music Entertainment UK, Universal Music UK, EMI Records UK & Ireland, BMG International UK & Ireland, Warner Music UK, Virgin Records Ltd., and Pinnacle Records. Retailers are also being asked to submit records to the OFT. The deadline for complying with the order is February 23.

British music fans pay some of the highest prices in the world for CDs: an average of approximately $21.67 (£15) per disc, compared to $16.49 (DM35) paid by music lovers in Germany and $16.86 (120 francs) in France. Americans pay an average of $15.55 for the same recordings. According to the OFT, the music industry has "blatantly and abusively overcharged UK consumers."

Late last year, European commissioners blocked a proposed merger of EMI and Warner Music, fearing further reduction of competition in the European music market. A pending merger of Bertelsmann Music Group and EMI faces similar obstacles.

The OFT investigation may stretch well into next summer. If those under investigation are found to have violated laws intended to encourage competition in the marketplace, they could be subject to fines amounting to 10% of their sales in the UK for as long as three years. The UK's most recent inquiry into CD prices, in 1994, found that prices were acceptable.

Curiously, on February 4, a few days before the OFT announced its investigation, John Arlidge wrote a piece in The Observer Sunday newspaper detailing the resurgence of vinyl records in Britain. In 2000, sales of vinyl bounced back by an astounding 34% over 1999, with over three million sold. During the same period, CD sales rose by only 14%. The resurgence astonished the music industry, which, according to Arlidge, "had written off the format as too costly and outmoded."

HMV, one of the UK's biggest music chains, has increased its vinyl inventory by 10%. Virgin Megastores has similarly accommodated the phenomenon. Arlidge credits record collectors, classical music fans, "club culture," young music fans discovering the past, and the success of the film High Fidelity for reviving British interest in vinyl. More than 70% of British households still have turntables, he mentions.