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FTC, CD Makers Settle In Alleged Price-Fixing

Time Warner Inc. and four other leading record companies agreed to stop what

U.S. officials said were pressure tactics that have added $500 million to

compact disc prices since 1997.

The five biggest record companies, which sell about 85 percent of the U.S. CDs,

will revise advertising and promotion agreements with record stores to end

anticompetitive policies, the U.S. Federal Trade Commission said yesterday.

Record labels won't pay penalties, but consumers might see lower CD prices as a

result of the agreement, an FTC official said yesterday.

The companies-units of Manhattan-based Time Warner, Japan's Sony Corp.,

Britain's EMI Group Plc, Germany's Bertelsmann Inc., and Canada's Seagram

Co.-will drop for seven years what the FTC called coercive agreements requiring

stores to charge specific minimum prices for CDs.

"There was no plausible business justification for this other than to get the

prices up," FTC Chairman Robert Pitofsky said at a news conference announcing

the settlement.

The record labels introduced the minimum advertised prices in the early 1990s

to squash a CD price war initiated by Best Buy Co. Inc., Circuit City

Stores-Circuit City Group and Target Corp., the FTC said. The discount stores

were selling CDs for $9.99, about $2 to $3 below the going rate.

In an attempt to raise CD prices to earlier levels, Time Warner, Seagram's

Universal Music Group, Sony, EMI and Bertelsmann pressured record stores not to

advertise CDs below a set amount, the FTC said.

Many record companies had to comply at risk of losing hundreds of thousands or

even millions of dollars in advertising subsidies from the record companies,

the FTC said.

The FTC said because of the settlement, consumers could see lower CD prices,

which currently are around $16.99 to $17.99.

The companies didn't admit wrongdoing. Bertelsmann said the price policies it's

abandoning were "legitimate and appropriate" but settled to avoid protracted

litigation. Time Warner had disclosed a preliminary agreement to end the

practice in a filing last month with the U.S. Securities and Exchange

Commission. Time Warner's Warner Music unit and Seagram yesterday declined

comment on the settlement.

The FTC agreement yesterday will bar for seven years the record companies'

practice of requiring stores to sell CDs at minimum advertised prices.BLOOMBERG

NEWS

Time Warner Inc. and four other leading record companies agreed to stop what

U.S. officials said were pressure tactics that have added $500 million to

compact disc prices since 1997.

The five biggest record companies, which sell about 85 percent of the U.S. CDs,

will revise advertising and promotion agreements with record stores to end

anticompetitive policies, the U.S. Federal Trade Commission said yesterday.

Record labels won't pay penalties, but consumers might see lower CD prices as a

result of the agreement, an FTC official said yesterday.

The companies-units of Manhattan-based Time Warner, Japan's Sony Corp.,

Britain's EMI Group Plc, Germany's Bertelsmann Inc., and Canada's Seagram

Co.-will drop for seven years what the FTC called coercive agreements requiring

stores to charge specific minimum prices for CDs.

"There was no plausible business justification for this other than to get the

prices up," FTC Chairman Robert Pitofsky said at a news conference announcing

the settlement.

The record labels introduced the minimum advertised prices in the early 1990s

to squash a CD price war initiated by Best Buy Co. Inc., Circuit City

Stores-Circuit City Group and Target Corp., the FTC said. The discount stores

were selling CDs for $9.99, about $2 to $3 below the going rate.

In an attempt to raise CD prices to earlier levels, Time Warner, Seagram's

Universal Music Group, Sony, EMI and Bertelsmann pressured record stores not to

advertise CDs below a set amount, the FTC said.

Many record companies had to comply at risk of losing hundreds of thousands or

even millions of dollars in advertising subsidies from the record companies,

the FTC said.

The FTC said because of the settlement, consumers could see lower CD prices,

which currently are around $16.99 to $17.99.

The companies didn't admit wrongdoing. Bertelsmann said the price policies it's

abandoning were "legitimate and appropriate" but settled to avoid protracted

litigation. Time Warner had disclosed a preliminary agreement to end the

practice in a filing last month with the U.S. Securities and Exchange

Commission. Time Warner's Warner Music unit and Seagram yesterday declined

comment on the settlement.

The FTC agreement yesterday will bar for seven years the record companies'

practice of requiring stores to sell CDs at minimum advertised prices.

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