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Monday, June 17, 2024 | Back issues
Courthouse News Service Courthouse News Service

For Music Labels, One Case Closes and Another Opens

(CN) - Recording industry bigwigs concluded one costly class action in Canada on the same day that the U.S. Supreme Court gave American consumers the go-ahead to pursue allegations of an online price-fixing conspiracy.

The Canadian divisions of EMI, Sony, Universal and Warner announced on Monday that they had settled a class action brought by songwriters and music publishers, which claimed that the recording companies committed copyright infringement and owed them royalties.

Under the agreement, the labels will pay about $45 million to "resolve all disputed claims related to their past music releases in audio and video formats and to settle a copyright infringement class action lawsuit commenced in 2008. The Ontario Superior Court of Justice now must approve the settlement.

As the recording giants were issuing a statement on the settlement, the U.S. Supreme Court refused to halt a class action pending in New York over an alleged antitrust conspiracy. Chief Justice John Roberts and Justice Sonia Sotomayor did not consider the case, according to the court's order.

The American arms of the aforementioned labels, along with several subsidiaries and other companies, had appealed to the high court after the 2nd Circuit ruled last year to revive the complaint.

Consumers, led by Kevin Starr, claim that the big four, which together control 80 percent of music sold over the internet, conspired with the other major record labels to fix the prices of online music sales.

The labels allegedly fixed prices by agreeing to sell their music exclusively through two joint ventures they created, Pressplay and MusicNet, at a set wholesale price of 70 cents per song. MusicNet was created by Bertelsmann, Warner and EMI, and Pressplay was launched by Universal and Sony.

The complaint states that the labels agreed on the price in side agreements when other online outlets started to distribute their music. They needed a cash cow after the introduction of digital music had caused CD sales to nosedive.

U.S. District Judge Loretta Preska had originally dismissed the complaint in 2008, finding that the allegations "did not yield and inference of an illegal agreement."

On appeal in the Manhattan-based second circuit, a three-judge panel found that the evidence of conspiracy was strong enough to go trial.

The labels maintained high prices even after their start-up costs were recouped, and the plaintiffs backed up their claims of clandestine wholesale-price agreements, the court found.

Consumers complained that subscriptions to MusicNet and Pressplay, at $240 per year, were restrictive.

Both services were tightly regulated so that subscribers could not copy more than two songs from any single artist onto a CD each month, and they could not transfer songs to portable music players, such as iPods, according to the complaint. The music they bought often expired until repurchased, the suit states.

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