Some of the biggest names in music are being accused of price fixing internet music downloads in an effort to stem profit erosion.
The actions of the music Companies have come to light following the filing of legal documents in the US.
Red Herring Magazine in the USA has reported that one of the biggest names in US class-action lawsuits has filed a complaint in the US federal court accusing major music labels of fixing prices for Internet music downloads and CDs, the court has reported. San Diego lawyer William Lerach’s suit says that Sony BMG, Universal Music, Time Warner, Bertelsmann, and EMI fought together to keep the online music market from emerging, and then “conspired to fix and maintain” music prices once services like Apple’s highly successful iTunes became inevitable. Lerach’s firm filed the suit on behalf of 11 plaintiffs who purchased music online or on CDs, and on behalf anyone who has “paid inflated prices” for music.
Filed in a federal court in San Francisco, the suit follows a U.S. Department of Justice investigation into the pricing of online music and collusion among the major labels on how songs are sold over the Internet. New York Attorney General Eliot Spitzer has also launched a similar probe (see Spitzer Issues Music Subpoenas, DOJ Probes Music Pricing).
The suit alleges that the record labels “use their market power to coerce online music retailers to sign “most favored nation” agreements that specify that the retailers must pay each of the defendant labels the same amount. By setting a wholesale price floor at $0.70 per song, defendants have fixed and maintained the price of online music at supracompetitive levels,” the suit says.
Lawyers at the law firm of Lerach Coughlin Stoia Geller Rudman and Robbins could not be reached for comment. The suit also alleges that the record labels sought to shut down online music pioneer Napster at the same time they were introducing their own joint ventures to sell online music. MusicNet and pressplay “were not serious commercial ventures, but rather attempts to occupy the market with frustrating and ineffectual services in order to head off viable Online Music competitors from forming and gaining popularity after Napster’s demise,” according to the suit.
The music industry’s pricing of online music has not just been garnering attention from trial lawyers. The U.S. DOJ has sent out civil investigative demands to Sony BMG, Universal Music, Warner Music Group, and EMI. The DOJ’s investigation into the possibility of anticompetitive practices in the music download industry follows a December probe by the New York Attorney General asking similar questions.
The Lerach firm is well-known to Silicon Valley technology firms because of its long record of filing shareholder class-action suits against corporations, usually stemming from allegations that corporate executives withheld information that cause share prices to fall. Few of the cases come to trial. Many end with the companies paying settlements in the millions of dollars. Meantime, the Recording Industry Association of America has been stepping up its crackdown on downloads of online music it considers illegal. In February, the RIAA sued a home health aide in Brooklyn, New York, who claims she has never turned on a computer.
The RIAA could not immediately be reached for comment.