Antitrust Settlement with Record Distributors and Retailers - Page 2

The companies will pay $67,375,000 in cash, provide $75,500,000 worth of music CDs, and not engage in sales practices that allegedly led to artificially high retail prices for music CDs and reduced retail competition as part of the agreement. Tennessee's share is an estimated $993,948 in cash and $1,507,852 in CDs.

"The lawsuit and settlement demonstrate our commitment to halting corporate misconduct," Attorney General Summers said. "Such illegal activity causes our citizens to pay higher prices and distorts our free market economy."

Tennessee, along with 41 other states and three territories filed an antitrust lawsuit in federal court in August, 2000. The lawsuit alleged the five music distributors (including their affiliated labels) and three large music retailers entered into illegal conspiracies to raise the price of pre-recorded music to consumers. 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 deny these allegations.

Today's agreement calls for the defendants to change sales practices to ensure strong price competition among retailers. The companies will pay $67,375,000 in consumer compensation, charitable purposes, or some combination of both. Notice of how to file a claim will be provided to the public at a later date. Finally, the defendants will provide approximately 7,000,000 music CDs (valued at $75,500,000) for distribution by the state attorneys general to not-for-profit corporations, charitable groups and governmental entities such as schools and libraries for the benefit of all consumers in each state.

UPDATE
The antitrust lawsuit filed by the 42 states was based upon information generated by an FTC investigation settled with the distributors in 2000 as stated here:

The Federal Trade Commission announced today that it has reached separate settlement agreements with Universal Music and Video Distribution, Sony Corp. of America, Time-Warner Inc., EMI Music Distribution and Bertelsmann Music Group (BMG), the five largest distributors of recorded music who sell approximately 85 percent of all compact discs (CDs) purchased in the United States to end their allegedly illegal advertising policies that affected prices for CDs. The proposed agreements would settle FTC charges that all five companies illegally modified their existing cooperative advertising programs to induce retailers into charging consumers higher prices for CDs, allowing the distributors to raise their own prices. The complaints are the culmination of an extensive industry-wide investigation by the FTC of these practices. The FTC's orders would require all the companies to discontinue their "Minimum Advertised Price" (MAP) programs in their entirety for seven years. The orders contain additional provisions to preclude the companies from maintaining the anticompetitive status quo.
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