Attorney General's News Release

Augist 8, 2000

Compact disc distributors, retailers conspired to keep prices high, Nixon and 29 other AGs say in lawsuit

Jefferson City, Mo. — Several of the nation's largest distributors and retailers of pre-recorded music conspired to artificially inflate the price of compact discs, Missouri Attorney General Jay Nixon and 29 other Attorneys General claimed in a lawsuit filed today in federal court in New York.

The antitrust lawsuit names as defendants the retail giants Musicland, which operates more than 1,300 retail outlets under the names Musicland and Sam Goody, and Trans World, which operates more than 900 stores under such names as Camelot and Tower Records. Also named are major distributors Sony Music, Elektra, Warner and Atlantic, among others. (See complete listing below.)

Nixon and the other Attorneys General are charging that from 1995 on, the defendants engaged in an illegal scheme aimed at stopping multi-product retailers such as Best Buy, Circuit City and Target from selling music at deep discounts. According to the complaint, Musicland and Trans World pressured the major distributors into expanding and rigidly enforcing policies that withheld advertising reimbursements from retailers who communicated discount prices to consumers.

"While the cost of manufacturing CDs dropped significantly throughout the 1990s, these defendants were raising prices," Nixon said. "When the multi-product retailers began selling the CDs for less to consumers, it posed a threat to the profit margins of the music-only stores. Those chains retaliated by making it more difficult for the multi-product retailers to sell their music at a discount, so consumers came out on the short end by having to pay higher prices."

The lawsuit seeks civil penalties and triple damages, as provided for under antitrust law. Missouri was joined in the lawsuit by Arizona, Arkansas, Connecticut, Delaware, Florida, Hawaii, Illinois, Indiana, Iowa, Kansas, Maryland, Michigan, Mississippi, Nevada, New Mexico, New York, North Carolina, Northern Mariana Islands, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Texas, Utah, Vermont, Washington, West Virginia and Wisconsin.

The other defendants include BMG Music, Bertelsmann Music Group Inc., Capitol Records Inc. (d/b/a 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 Bros. Records Inc., Warner-Elektra-Atlantic Corp., Warner Music Group Inc., Atlantic Recording Corp., Elektra Entertainment Group Inc. and Rhino Entertainment Co.

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to Press Secretary John Fougere.

E-mail      Phone: 573-751-8844         Fax: 573-751-5818