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Major Labels Feel the Heat from Across the Atlantic
European Commission Investigates Labels' Retail Pricing Practices
By Margee Fagelson
(more articles from this author)
2001-02-01
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Have you ever gone shopping in Europe? Ever tried to buy a pair of Levis or Gap jeans over there? Not that you would, but what if you needed to? You'd be astounded at the price difference. What costs $32 over here, costs £32 in England. Roughly translated, that's at best $50. And that's on a good exchange rate day.

CDs…don't get me started. If you don't live overseas, the only reason to buy recorded music is if it's something unavailable over here. And at this point, how often does that happen? Now I'm not encouraging the fall of the European economy. I buy Branston pickle and Galaxy bars and Tetley tea whenever I can find them in America – cost be damned! However, I deeply regret the £20 I spent on Lyle Lovett's Joshua Judges Ruth on my student budget, when I could have waited 'til I got home and spent $15 – it was a few years ago.

Well now there are suspicions – and charges – that The European Community has been getting the shaft. The European Union has opened an antitrust case against the big five record labels, charging them with sustaining an unreasonably high retail price on audio CDs. They just can't catch a break, can they? This follows closely on the heels of similar charges, stateside.

The New York Times reported: "Earlier this week the European Commission, the union's executive body, sent letters to Universal Music and Video Distribution, the Sony Corporation of America, AOL Time Warner, EMI Music Distribution and Bertelsmann Music Group, and to 13 music store chains and 5 Web sites doing business in Europe. A spokeswoman for the commission, Amelia Torres, said investigators were looking for signs of collusion among the big five music groups, and were investigating business arrangements each company had with the retailers, which she did not identify."

On May 10, 2000, the US Federal Trade Commission (FTC) settled with the major labels, ceasing the labels' practice of punishing retailers who sold their products below the minimum cost – what is known in the industry as MAP, minimum advertised price. The practice promised that co-op money would be withheld should they not comply. Co-op money is advertising dollars awarded by manufacturers to retailers, to offset the cost of housing and displaying their products. Arguments abounded among retailers - small, large, offline and online - as they complained that the big five were making it impossible for anyone but the major chain stores to survive in a climate like that. These arguments were countered with the explanation that these minimums were established just to protect the independent and new retailers so as not to let them be crushed by the major chains that could easily cut prices and take a loss on several pieces at a time.

What prompted the EC to suddenly have concern over their inflated costs? The proposed EMI/Warner music merger investigations revealed signs of price fixing. However, four years earlier, the British had conducted an investigation into price-fixing collusion and could find no hard evidence to support their suspicions, then. Everyone in the EC has been complaining about these prices for years.

The Times [London] reported that other concerns addressed are the drastic cost differences between CDs and cassettes (We'd all like to know that, since it's been proven that CD production is mere cents, these days.), the price variations from country to country – in the EC alone – and of course between any given EC country and the US.

It is expected that Brussels will be under pressure to get to the bottom of all of these accusations. Whether or not they can make a difference remains to be seen. Whether or not the big five get nailed or prove themselves innocent victims also remains to be seen. The controversy over digital music and its prevalence may render these arguments near moot. Perhaps the tech-pundits are right and CDs will be so archaic that their price will be universally low just to drum up interest in a medium gone the way of the 8-track.

Linkography

AOL Time Warner - www.aoltimewarner.com
Bertelsmann - www.bertelsmann.com
BMG - www.bmg.com
EC - http://europa.eu.int
EMI Group - www.emigroup.com
FTC - www.ftc.gov
Sony Music - www.sonymusic.com
The Times - www.thetimes.co.uk
New York Times - www.nytimes.com
Warner Music - www.warner.com/music/
Universal Music Group - www.umusic.com

Related MusicDish e-Journal Articles:
» 28 States Sue Major Labels and Retailers Over Alleged Price Fixing Conspiracy (2000-08-08)
» Scratch The Surface And What Do You Find: A Cheaper CD - Follow-up on the FTC Settlement with the Major Labels (2000-05-18)
» Five Major Labels Settle With The FTC Over Retailer CD Pricing - In The Last 3 Years, Consumers May Have Paid $480 Million More For CDs (2000-05-11)


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