|September 30, 2002
Media Contact: Jenn Meale
Phone: (850) 245-0150
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TALLAHASSEE -- Five of the largest distributors of prerecorded music and three major retailers will pay $67.3 million and provide $75 million in free compact discs to settle charges that they conspired to artificially inflate the cost of CDs, Attorney General Bob Butterworth announced today.
Without admitting wrongdoing, the companies also agreed to modify their marketing practices to help ensure open competition in the sale of prerecorded music. Entering agreements with all 50 states, the District of Columbia, Puerto Rico and various American territories were distributors Bertelsmann Music Group Inc., EMI Music Distribution, Warner-Elektra-Atlantic Corp., Sony Music Entertainment Inc. and Universal Music Group Inc. and retail chains Trans World Entertainment Corp., MTS Inc./Tower Records and Musicland Stores Corp.
In August 2000, Florida and other states filed an antitrust complaint against the companies charging them with conspiring to stop retail outlets such as Best Buy, Circuit City and Target from offering music at deep discounts. They did so, the complaint said, by establishing policies under which distributors withheld reimbursements for advertising expenditures by retailers if the advertised price for a particular product was not at or above the distributors' prescribed advertised price.
"Those policies were designed to prevent certain retailers from offering truly competitive pricing on prerecorded music," Butterworth said. "The net result was less competition and higher prices for consumers."
Under the agreements, $67.3 million will be paid by the companies for partial consumer refunds and to cover costs of the states' investigation and administration of the restitution process. Partial refunds will be available to consumers who purchased prerecorded music from 1995 to 2000, the period during which the objectionable policies were in place. The agreements call for a single refund amount to be paid to each consumer regardless of the number of CDs purchased. A rough estimate puts the refund amount at between $5 and $20 per buyer, but the actual amount will depend on how many people apply. Any funds not used for consumer refunds will be given to non-profit organizations and/or public entities to be used for music related purposes. Notice of how to file for partial refunds will be provided to the public at a later date.
The agreements also call for the companies to provide an estimated 5.5 million CDs valued at $75.7 million to non-profit organizations, charitable groups and governmental entities such as schools and libraries.
In addition to the cash and product distributions, the companies have agreed to abide by marketing policies that help ensure strong price competition and do not force retailers to increase CD prices.
The agreements were handled for Florida by Antitrust Chief Trish Conners and Senior Assistant Attorney General Liz Leeds.