Price-Fixing Alleged in Guitars & Amps

SAN DIEGO (CN) - An antitrust class action claims the National Association of Music Merchants conspired with the Guitar Center and Fender Musical Instruments to raise prices on amplifiers, guitars and other "fretted instruments."

The class claims the Association shared pricing information to protect its members from competition, "restricting retail price competition, or by eliminating price discounting entirely."

Guitar Center is almost five times the size of its nearest competitor, according to the federal complaint. It is the only national guitar chain, has 295 stores, and a market share that grew from 6.1 percent to 26.6 percent from 1997 to 2007, the complaint states.

The complaint also alleges price-fixing on guitar strings.

Fender makes and sells fretted instruments, including the nation's best-selling guitar, the complaint states.

In March this year the Federal Trade Commission issued a cease and desist order to the National Association of Music Merchants (NAMM) and settled charges that the 9,000-member association had "permitted and encouraged" unfair methods of competition among its members.

The FTC alleged that between 2005 and 2007, NAMM held meetings and trade shows where retailers were encouraged to exchange competitive information, strategies for implementing minimum advertised pricing, and restricting retail price information.

"At meetings and programs sponsored by NAMM, competing retailers of musical instruments discussed strategies for raising retail prices and exchanged information on competitively sensitive information such as prices, margins, minimum advertised price policies, and their enforcement," the FTC alleged.

With Guitar Center's market power and NAMM's backing, it has been able to manipulate prices and control the market to suit itself, the complaint states.

The U.S. musical instrument market grossed $7.1 billion in 2008, more than $1.5 of which came from fretted instruments, according to the complaint.

Since 2006, the price of an average guitar has increased by more than $60, the complaint states. Guitar Center and Fender have profited despite a 10 percent decline in unit sales, the complaint adds.

The class claims that competition has been unfairly "restrained, suppressed, and in some cases destroyed."

The complaint accuses NAMM, Guitar Center and Fender of violating the Sherman Antitrust Act, unlawfully restraining trade, attempted monopolization, and unfair competition.

Lead plaintiff David Giambusso demands an injunction and class damages.

Plaintiffs are represented by Mark Tamblyn with Squitieri & Fearon, of New York, N.Y.

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