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Online Music Price Fixing Lawsuit Back; Court Rules Against Labels

Major labels must once again face charges related to online price-fixing, according to an Appeals Court order issued Wednesday. In November of 2008, US District Judge Loretta A. Preska dismissed accusations that labels had acted unfairly to control pricing on digital platforms. But that has now been overturned by the US Second Circuit Court of Appeals in New York, which pointed to plausible evidence of unfair cooperation and violations of Section 1 of the Sherman Antitrust Act.

Among others, the decision names majors Universal Music Group, Warner Music Group (NYSE: WMG), EMI Music, and the once-merged Sony (NYSE: SNE) BMG Music Entertainment, among others. In the ruling, the court pointed to “enough factual matter (taken as true) to suggest that an agreement was made,” while ruling that the “district court erred in dismissing the complaint.”

The decision dials back to now-defunct label joint ventures MusicNet and Pressplay. Both were ill-fated attempts to position heavily DRM-protected, limited catalogs, though the Appeals Court pointed to the services as venues for unfair price cooperation. “Both the joint ventures and the Recording Industry Association of America (‘RIAA’) provided a forum and means through which defendants could
communicate about pricing, terms, and use restrictions,” the opinion states.

The decision then delves into live after those ventures, and in particular, the use of ‘Most Favored Nations’ clauses to ensure equitable and uniform wholesale pricing to majors. In many cases, those MFNs were handled in secrecy to avoid antitrust scrutiny. “Defendants attempted to hide the MFNs because they knew they would attract antitrust scrutiny,” the Appeals decision states. In the end, a wholesale price-point of 70-cents on recordings resulted, something the court determined was created by cooperative action, not parallel independent business decisions. Full decision PDF here.

This story has been provided by our content partner Digital Music News.

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