States Settle Compact Disc Case

SEATTLE - The nation's largest recorded-music distributors and compact disc retailers will pay a combined total of $143 million to settle a national price fixing case in which states alleged consumers paid too much for compact discs.

Under the settlement announced today by Attorney General Christine Gregoire, distributors will provide Washington schools and libraries with at least $1.5 million worth of music CDs, and an additional amount that will be used either for restitution to individual consumers or for charitable purposes. The process by which consumers may apply for restitution will be announced at a later date.

Nationwide, distributors will pay $67.3 million in cash for consumer compensation and charitable purposes, and provide $75.5 million worth of compact discs to be distributed to non-profit organizations, schools and libraries. Retailers will also pay the states a total of $3 million.

The settlement brings to a close a lawsuit filed nearly two years ago in which attorneys general accused distributors and music labels of engaging in a scheme to prevent some non-traditional music retailers-such as Best Buy, Circuit City and Target-from offering compact discs at deep discounts.

The lawsuit specifically targeted "minimum advertising price," or MAP policies, in which distributors penalized retailers who offered discount-priced CDs. To enforce these policies, distributors withheld advertising reimbursements each time a retailer sold CDs at reduced rates. As a result, retailers were discouraged from offering discounts.

"Competition in the sale of CDs brings low prices, which is good for consumers and for record stores," Gregoire said. "This agreement reimburses consumers who were paying more than they should have for the music they purchased."

Named in the lawsuit were affiliated labels BMG Music, Bertelsmann Music Group Inc., Capitol Records Inc., which does business as EMI Music Distribution; Virgin Records America

Inc.; Priority Records, LLC; Sony Music Entertainment Inc.; Universal Music & Video Distribution Corp.; Universal Music Group Inc.; UMG Recordings Inc.; Warner-Elektra-Atlantic Corp.; Warner Music Group Inc.; Warner Bros. Records Inc.; Atlantic Recording Corp.; Elektra Entertainment Group Inc., and Rhino Entertainment Co.
Retail outlets named in the lawsuit were MTS Inc., which does business as Tower Records; Musicland, which operates more than 1,300 retail outlets under the Musicland and Sam Goody trade names; and Trans World, which operates more than 900 stores under the names Camelot, FYE, Music & Movies, Planet Music, Record Town, Saturday Matinee, Spec's Music, Strawberries and the Wall.

-30-