28 States Sue Record Companies
N E W  Y O R K, Aug. 9 -- Record companies should pay back millions of dollars in illegal profits they collected by forcing discount stores to raise CD prices in 1995, attorneys general for 28 states alleged in a lawsuit.
“These illegal actions certainly have not been music to theears of the public,” New York Attorney General Eliot Spitzer saidat a news conference on Tuesday as the lawsuit was filed in U.S.District Court in Manhattan.
Mitigating CircumstancesThe music companies maintain that they threatened to stopsupplying discount chains with thousands of advertising dollars inthe mid-1990s because the chains were selling CDs at belowwholesale cost, driving some record stores out of business. Theyindicated Tuesday that they would contest the lawsuit.
The lawsuit comes three months after the five major musicdistributors, while admitting no wrongdoing, settled Federal TradeCommission charges they unfairly inflated CD prices.
Under that deal, the companies agreed to discontinue minimumadvertised price programs that forced retailers to sell music CDsat or above a set level in return for getting substantialadvertising funding.
Spitzer said the lawsuit, which seeks unspecified damages, wasmeant to force record companies to pay back the profits they madeillegally.
He said he could not yet estimate the value of those profits butsaid the $480 million estimated by the FTC sounded reasonable.
Business as UsualKeith Estabrook, a spokesman for BMG Music, said the companystill believed that the pricing policy “was a legitimate andappropriate practice and we are confident that the courts willreach the same conclusion.”
Will Tanous, a Warner Music spokesman, concurred, saying thepricing policies served “a valid business purpose and benefitedconsumers by substantially furthering retail competition.”
“It was an appropriate and lawful practice,” he added.
Dawn Bridges, an EMI Music spokeswoman, said the claims werewithout merit. Sony Music spokesman Keith McCarthy said he had nocomment, while Universal Music did not immediately return atelephone message seeking comment.
