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ATTORNEYS GENERAL WIN ANTITRUST SETTLEMENT IN ALLEGING PRICING CONSPIRACY ON MUSIC CDS
September 30, 2002
SEPTEMBER 30, 2002 JOHN BRAUTIGAM, Assistant Attorney General 207-626-8867
Music Distributors and Retailers Agree to Pay $67 Million in Cash, provide $75 Million Worth of Free CDs, and Change Sales Practices to Settle National Lawsuit.
Attorney General G. Steven Rowe announced today that five of the largest U.S. distributors of prerecorded music CDs along with three large retailers have agreed to provide $143,075,000 in cash and product to settle a nationwide antitrust lawsuit brought by the Attorneys General and private counsel. The settlement amount entails $67,375,000 in cash and $75,700,000 worth of music CDs.
In addition, the defendants agreed not to engage in sales practices that allegedly led to artificially high retail prices for music CDs. Maine, along with 39 other states and three territories filed an antitrust lawsuit in federal court in August 2000. The lawsuit alleged that the five music distributors (including their affiliated labels) and three large music retailers entered into illegal conspiracies to raise the price of prerecorded music to consumers. The remaining states were represented by private counsel.
This national case has generated particular interest in Maine because Chief Judge D. Brock Hornby of the United States District Court in Portland was designated to preside over the litigation. It is rare for such large nationwide cases to be litigated in Maine.
The defendants in the lawsuit are music distributors Bertelsmann Music Group, Inc., EMI Music Distribution, Warner-Elektra-Atlantic Corporation, Sony Music Entertainment, Inc., Universal Music Group and national retail chains Transworld Entertainment Corporation, Tower Records, and Musicland Stores Corporation. The defendants have denied the allegations.
Today's settlement has three major components:
â€¢ Sales Practice Changes. Defendants have agreed to an injunction preventing them from forcing retailers to increase CD prices and strengthening price competition in the industry.
â€¢ Consumer Compensation. The defendants will pay $67,375,000 for nationwide consumer compensation, charitable purposes, or some combination of both. Individual members of the public who wish to file a claim will be notified of the claims process at a later date.
â€¢ CDs for Charitable Groups. Defendants will provide approximately 7,000,000 music CDs (valued at $75,700,000) for nationwide distribution by the Attorneys General of the litigating states to not-for-profit corporations, charitable groups and governmental entities such as schools and libraries.
"The lawsuit and settlement demonstrate our commitment to halting corporate misconduct that causes our citizens to pay higher prices and distorts our free market economy," said Attorney General Rowe.
According to Assistant Attorney General John Brautigam approximately 24,733 music CDs valued at $337,898 will eventually be distributed to qualified corporations, charitable groups and government entities in Maine. In addition, an estimated $222,736 in cash refunds will be distributed to Maine residents who previously purchased music CDs. The settlement provides for a national claims process through which consumers will be able to obtain their refunds.
The settlement is subject to approval by the federal district court in Portland. Once the settlement is approved, the parties expect that cash and CDs will be distributed sometime in 2003.
For more information please contact Chuck Dow or John Brautigam at (207) 626-8800.