New York Settles Price-fixing Case Against Major Distributors Of Compact Discs

State Attorney General Spitzer today announced a $143 million nationwide antitrust settlement of price-fixing charges against the five top U.S. distributors of pre-recorded music compact discs ("CDs") and three large music retailers.

The case, led by New York and Florida along with the attorneys general of 41 other states and commonwealths charged that, between 1995 and 2000, record companies conspired with music distributors to inflate the prices of CDs in violation of state and federal antitrust laws, costing consumers millions of dollars. Consumers in all 50 states will share in the settlement.

Under terms of the settlement, $67.375 million in cash will be distributed to the settling states. This money will be used to compensate consumers who overpaid for CDs during the 1995-2000 period, as well as to pay settlement administration costs and attorneys' fees. Consumers who purchased CDs between 1995 and 2000 will be able to file claims for part of this fund.

In addition, 5.5 million CDs, valued at $75.7 million, will be distributed to public entities and nonprofit organizations in each state to benefit CD consumers and promote music programs.

"This is a landmark settlement to address years of illegal price-fixing," Spitzer said. "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."

In New York, the Attorney General's office is working with the State Department of Education to develop a statewide plan to distribute the CDs to public schools and libraries.

The attorneys general filed an antitrust lawsuit in federal court in August 2000, charging that, for a period of five years, the leading music distributors - Bertelsmann Music Group, EMI Music Distribution, Warner-Elektra-Atlantic Corporation, Sony Music Entertainment, Universal Music Group and the national retail chains Trans World Entertainment, Tower Records, and Musicland Stores - illegally conspired to use minimum advertised pricing ("MAP") policies to raise the retail prices that consumers paid for CDs. As a result, price discounting was eliminated and price competition among music retailers was significantly reduced. Under the settlement the distributor defendants agreed to stop using the MAP policies that forced retailers to raise CD prices or led to non-competitive pricing.

The CD settlement is subject to approval by the U.S. District Court in Portland, Maine. Upon approval, public notices will be provided to consumers detailing the settlement and the procedure for filing a claim for part of the settlement fund.

The Federal Trade Commission brought a similar but separate action against the music distributor defendants that was resolved in May 2000 with the entry of consent decrees requiring the parties to cease using MAP policies to achieve non-competitive pricing. Unlike the case settled with Spitzer's office, the FTC did not obtain monetary relief and did not address price-fixing among retail distributors.

The case is being handled in Spitzer's office by Assistant Attorneys General Linda Gargiulo, Emily Granrud and Robert Hubbard, along with Director of Economics Hampton Finer of the AG's Antitrust Bureau, which is under the direction of Bureau Chief Jay Himes.

To view more information on the Compact Disc Minimum Advertised Price Antitrust Litigation Settlement visit www.musiccdsettlement.com

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