UPDATE: States Sue Record Labels For Price-Fixing

Do you feel like you're paying too much for CDs?

Well, apparently New York, Florida, Texas, Arizona, Kansas, and 25 other states do.

On Tuesday, New York State Attorney General Eliot Spitzer announced that 30 states and U.S. territories have joined together in a lawsuit against the five major U.S. record companies charging that they conspired to fix the price of CDs.

New York and Florida are at the forefront of the coalition, which is seeking damages from Capitol Records, Sony Music, BMG Music, Universal Music, and Warner Music. The suit, filed in federal court in Manhattan, claims that the labels have, since 1995, conspired to increase the price of CDs, which would violate state and federal antitrust laws. Spitzer's office cited a Federal Trade Commission investigation that estimated these practices have cost record buyers more than $480 million. Spitzer said the states are still determining how much they will seek from the record labels

in the way of damages.

"Because of these conspiracies, tens of millions of consumers paid inflated prices to buy CDs of artists including Santana, Whitney Houston, Madonna, and Eric Clapton," [RealVideo] Spitzer said in a press conference on Tuesday.

The suit also goes after music retailers like Sam Goody, Musicland, Camelot Music & Movies, Planet Music, Record Town, and Tower Records. Priority Records (part of the EMI label group) and Virgin Records America are also named in the suit.

The states charge that in the early '90s, discount retailers like Target, Wal-Mart, Kmart, Best Buy, and Circuit City were offering CDs for substantially less than traditional music outlets, causing the price of CDs to plunge from $15 to $10. The lawsuit goes on to charge that music retailers then pressured record labels to fix a minimum "floor price" for CDs and to penalize retailers that sold CDs at prices below the

"floor price."

Responding to the claims, Sony and Universal offered "no comment," while EMI (speaking on behalf of Capitol) told MTV News, "We believe the claims are without merit." BMG also elaborated, saying, "We still believe that M.A.P. [Minimum Acceptable Pricing] was a legitimate and appropriate practice, and we are confident that the courts will reach the same conclusion."

In May, the five major label groups agreed to end all M.A.P. programs in which stores were required to advertise CDs at or above a set price in return for promotional funding. The antitrust settlement came as a result of charges sbrought by the Federal Trade Commission against the "Big Five" following its investigation into pricing practices (see "CD Prices May Come Down As Result Of Settlement").

New York, Florida, Texas, Arizona, and Kansas are joined by Arkansas, Connecticut, Delaware, Hawaii, Illinois, Indiana, Iowa,

Maryland, Michigan, Mississippi, Missouri, Nevada, New Mexico, North Carolina, Northern Mariana Islands, Oklahoma, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Utah, Vermont, Washington, West Virginia, and Wisconsin in the suit.

Spitzer said any money that New York wins from the record labels in the suit will be donated to music education programs.

The lawsuit comes as many Internet users are turning to Napster and other online outlets for new music and defending the free trade of music online by pointing to the high cost of new CDs.