CD prices are off the charts

August 09, 2000

CD prices are off the charts


A suit against five major record labels and three distributors alleging price fixing may result in a drop in compact disc prices, but it likely won't result in direct reimbursement to consumers.

And it probably won't change consumer buying habits.


"Prices are too high, it's a big money scam," Dave Griffith, 50, of Berkeley Springs, W.Va., said Wednesday of CDs. "But people are still buying, they're not comfortable with it (prices), I'm not comfortable with it."

Hagerstown student Carmen Veneziano, 17, said he "expects to pay $18.99. Now the average seems to be $16.99. That's not too startling a price, not too high, not too low."

Shaun Bryant, 21, of Hagerstown, said, "I'll pay any price as long as it's the type of music I like."

As for Hagerstown guitarist Louie Palladino, a member of the band the Rhythm Kings, higher prices are OK as long the musicians, not the record companies, make more money.


Thirty states including Maryland, Pennsylvania and West Virginia filed suit Tuesday in New York federal court alleging record companies engaged in an unlawful minimum-pricing scheme.

Retailers that sold below the established minimum price would have their advertising reimbursement withheld, the suit alleges.

Recording labels named in the suit were BMG Music and Bertelsmann Music Group Inc. (RCA, Arista, BMG Classics, Windham Hill and Bay Boy Entertainment labels); Capitol Records Inc. (Capitol Blue Note, Angel Records, Virgin Records America Inc. and Priority Records, LLC); Sony Music Entertainment Inc., (Columbia, Epic, C2, Sony); Universal Music Corporation (A&M, Def Jam, Geffen, MCA, Motown, Polydor, Universal, and Verve); and Warner-Elektra-Atlantic Corporation.

Retailers named were MTS, Inc. (Tower Records); Musicland Stores Corporation (Sam Goody, Musicland); and Trans World Entertainment Corporation (Record Town, Camelot Music, The Wall).

The suit alleges the companies conspired to raise prices and reduce retail price competition, especially from retailers such as Best Buy, Circuit City and Target which were selling CDs below the minimum advertised price.

The suit follows a May settlement between BMG, Time-Warner Inc., Universal, Sony, Capitol and the Federal Trade Commission to abandon the advertising pricing policies. The companies admitted no wrongdoing in settling the FTC's charge they unfairly inflated CD prices.

"The goal of this suit is to have consumers pay a fair-market price for CD and not be a victim of a price-fixing scheme," said Sean Connolly, spokesman for Pennsylvania Attorney General Mike Fisher.

During retail prices wars in the early 1990s, CD prices fell as low as $9.99, according to the FTC. Prices for major artist CDs are now as high as $18 to $19.

In Hagerstown, Target and Borders Books and Music generally price their CDs between $12 and $15. At Camelot Music in Valley Mall, the prices range from $15 to $20.

The prices for best-selling artists such as Britany Spears or Santana, however, appears to be equal in the area. All three stores had Spears' "Oops! . . . I Did It again" CD for $14.99.

The National Association of Record Merchandisers estimates consumers paid more than $9 billion dollars for CDs in 1999. The FTC estimates consumers paid as much as $480 million more than they should have for CDs over the last three years.

The states are calculating the damages they will ask for. But they have asked for the awarding of triple damages to consumers and civil penalties against the companies.

Whether consumers get an actual rebate depends on the amount of a settlement or verdict, West Virginia Assistant Attorney General Douglas L. Davis said Wednesday.

If the case results in a situation where the price was $4 or more than a fair-market price, Davis said West Virginia might look at a reimbursement campaign.

If the funds were less, an individual reimbursement campaign wouldn't be cost-effective, he said.

In some consumer fraud cases, states use resulting funds for the larger public good. An oft-cited example is a settlement reached with 44 states and Toys R. Us, Mattel, The Little 1 Company and Hasbro.

The companies were alleged to have restricted supplies of toys to certain toy and warehouse club stores. As part of the $50 million settlement, Toys R. Us and the other companies are donating toys to the U.S. Marine Corps's "Toys for Tots" campaign.

Officials in New York, Maryland, Pennsylvania, and West Virginia attorneys general offices said any funds their states receive could be used for a variety of music education or enrichment programs.

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