Music Labels Must Face Digital Music Price-Fixing Class Action

A federal judge ruled this week that major record labels must face a consolidated class action lawsuit claiming they fixed prices on digital music.

Consumers claim in the digital music price-fixing class action lawsuit that the major music labels signed distribution agreements with two joint-venture entities called MusicNet and Pressplay that allowed them to conspire to fix the price, terms of sale and restrictions on digital music. Each licensing agreement allegedly included publicly hidden Most Favored Nation clauses that guaranteed licensors would receive the same terms, and set the base wholesale price of digital music at 70 cents per song.

Retailers that did not agree to the Favored Nation terms were allegedly shut out by the major labels. Independent online music competitor eMusic, for example, which charges less than half of the labels’ wholesale price at retail, is the second-largest online retailer, yet the labels refuse to do business with it, the class action lawsuit says.

The defendants in the digital music class action include music labels that control 80% of the digital music sales in the U.S.: Warner Music Group, Sony BMG Music Entertainment, Sony Corporation of America, Capital Records, Virgin Records America, Time Warner, Bertelsmann, EMI Group North America, Capitol-EMI Music and UMG Recordings.

The case is In Re: Digital Music Antitrust Litigation, Case No. 06-MD-1780 (LAP), United States District Court, Southern District of New York.