Office of the Attorney General News Release Archive

Monday, Sept. 30, 2002


Distributors and Retailers Agree to Provide Millions of Free CDs

AUSTIN - Texas Attorney General John Cornyn announced today that five of the largest national distributors of prerecorded music CDs and three large retailers have agreed to pay approximately $67.4 million in cash and provide $75.7 million worth of music CDs for public benefit. The distributors and retailers also agreed to no longer engage in the sales practices that allegedly led to artificially high retail prices for music CDs.

Texas, along with 40 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 plaintiffs also alleged that price competition among music CD retailers was reduced as a direct result of the conspiracy. The defendants in the lawsuit are music distributors Bertelsmann Music Group, Inc., EMI Music Distribution, Warner-Elektra-Atlantic Corporation, Sony Music Entertainment, Inc. and Universal Music Group. The national retail chains are Transworld Entertainment Corporation, Tower Records, and Musicland Stores Corporation. The defendants deny these allegations.

Today's settlement has three major components:

  • Sales practice changes. Defendants have agreed to an injunction preventing them from forcing retailers to increase CD prices and ensuring strong price competition among defendants.
  • Consumer compensation. The $67.4 million will be used for 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.
  • CDs for charitable groups. Defendants will provide approximately 5.5 million music CDs (valued at $75.7 million) for distribution by a claims administrator under the direction of the state attorneys general. Distribution will be made to nonprofit corporations, charitable groups and governmental entities such as schools and libraries for the benefit of all consumers in each state.

In August, 2000 the FTC resolved an investigation involving defendant music distributors minimum advertised pricing policies by obtaining injunctive relief. Unlike the present case, no monetary relief was obtained by the FTC.

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