CD Price-Fixing Case Settled

A "victory for consumers" may be a windfall for class-action attorneys and 41 states participating in a price-fixing case against the music industry. Some schools and public libraries may also benefit.

On September 30, five of the largest American distributors of recorded music—Bertelsmann Music Group, EMI Music Distribution, Warner-Elektra-Atlantic Corporation, Sony Music Entertainment, and Universal Music Group—and three large music retailers (Trans World Entertainment, Tower Records, and Musicland Stores, a unit of Best Buy Co., Inc.) agreed to settle a long-running price-fixing case, without admitting any wrongdoing. The value of the total settlement is estimated at $143 million.

The defendants agreed to distribute $67.3 million in cash to several states to compensate consumers who overpaid for CDs purchased during the period 1995–2000. They will also pay administrative costs and attorneys' fees generated during the case, which was launched in US District Court in Manhattan in August 2000, and continued in a court in Portland, Maine, where a judge will determine the distribution of the settlement.

The defendants were accused of breaking state and federal antitrust laws, "costing consumers millions of dollars," according to the Associated Press. The suit charged that in attempting to combat "loss leader" CD pricing by some large discount retailers, the defendants conspired to establish minimum prices for CDs (so-called "MAP," or minimum advertised pricies) in violation of US "fair trade" law. This resulted in gradual increases in retail prices, prosecutors claimed.

Announcements will be made later to inform consumers how they can participate in collecting refunds from the settlement. Anyone who bought CDs between 1995 and 2000 will be able to file claims for part of the fund, prosecutors explained. Instructions will be provided for those who lack sales receipts for discs they purchased during the period, they said.

The settlement also specifies that the defendants distribute approximately 5.5 million CDs to "public entities and nonprofit organizations in each state to promote music programs." The value of the discs to be donated is estimated at $75.7 million.

"This is a landmark settlement to address years of illegal price-fixing," New York State Attorney General Eliot Spitzer stated. "Our agreement will provide consumers with substantial refunds and result in the distribution of a wide variety of recordings for use in our schools and communities." The money and CDs will be distributed according to the relative populations of the states involved.