ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, July 10, 1996 TAG: 9607100048
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
DATELINE: KNOXVILLE, TENN.
SOURCE: Associated Press
In a lawsuit that could result in payments to millions of buyers, the nation's six largest makers of compact discs have been accused of scheming to keep CD prices artificially high.
A law firm representing two CD buyers filed the suit Monday and won immediate class-action status, which means other CD consumers can join. The suit does not specify how much it is seeking but limits each individual claim to $5,000.
The suit alleges the companies propped up retail CD prices, even though refinements in manufacturing and other improvements have cut the cost of making a CD from $3 in 1983 to less than $1 now.
``The six defendants have employed a variety of collusive schemes to maintain and increase profit margins on their sales of CDs,'' the lawsuit said. It was filed on behalf of anyone who bought CDs from any of the six companies after June 26, 1992.
The companies are EMI Music Distribution, a subsidiary of Britain's Thorn/EMI; Sony Music Entertainment, a subsidiary of Sony Corp. of Japan; Warner Elektra Atlantic Corp., a unit of Time Warner Inc.; UNI Distribution Corp., a unit of MCA Music Entertainment Group.
Also listed are Bertelsmann Music Group, a unit of Germany's Bertelsmann Inc.; and Polygram Group Distributors, a subsidiary of Philips Electronics N.V. of the Netherlands.
``We believe that suit is wholly without merit, and beyond that we do not comment on matters involving litigation,'' said Dennis Petroskey, a spokesman for Bertelsmann.
A spokeswoman for Sony and a spokesman for Time Warner said their companies had not seen the lawsuit so they could not immediately comment. The other companies did not immediately respond to requests for comment.
The lawsuit was filed by Knoxville attorney Gordon Ball in nearby Blount County Circuit Court on behalf of CD buyers Chris Robinson and George Silvey. It has been certified as a class action in 14 states and the District of Columbia.
The six manufacturers named in the suit are powerful, controlling more than 85 percent of the $9.4 billion-a-year U.S. compact disc industry, the lawsuit said.
Although consumers don't buy CDs directly from the manufacturers, the suit argues the manufacturers strong-armed retailers into keeping prices high. The mechanism for that, according to the lawsuit, is a ``minimum-advertised-price,'' or MAP, policy.
The MAP prices of the six defendants were virtually identical, ranging from $11.81 to $11.88 for a CD with a retail price of $16.98, the suit said. It contends the manufacturers kept retailers in line by suspending some advertising assistance or severing relationship with them if the retailers sold below certain minimum prices.
Their practices limited competition, the lawsuit said, having an impact on customers ``who are deprived of the benefit of vigorous price competition among retail stores.''
The lawsuit was certified as a class action in states that have laws protecting so-called indirect purchasers, consumers as opposed to retailers or other direct buyers. The companies, however, can ask the judge to decertify the lawsuit's class-action status.
The states are: Alabama, California, Florida, Kansas, Maine, Michigan, Minnesota, Mississippi, New Mexico, North Dakota, South Dakota, Tennessee, West Virginia and Wisconsin as well as the District of Columbia.
A similar price-fixing lawsuit was brought by retailers against some of the same companies in 1982 in Gary, Ind., over records and tapes. It resulted in settlements totaling $26 million.
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