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: Record companies strike a deal that may lower CD prices.


5-12-00 9:15 AM PST antiGUY
May 10th - Washington D.C. The United States Federal Trade Commission has settled an antitrust case they had been pursuing against five of the nation's leading record labels. The FTC had spent the past two years investigating the music companies and found that they had entered into illegal marketing agreements in order to end a price war over music compact disc. 

According to the FTC findings, they estimate that music buyer's had been potentially overcharged by $500 million in the past four years.  

Part of the marketing ploys used by the record labels was a program called "minimum advertised price". Under this program record companies agreed to help share the cost of advertising music CD's, in return the retailers agreed not to advertise discounts on compact disc in newspapers, TV and even in-store posters. This ban even applied to advertising that the retailers paid for on their own. 

The record companies dispute that this practice violated the law. The reason the practice was in place was to help music retailers so they wouldn't have to under cut their profits and take losses as a result of the price war. It must be pointed out as well, that this kind of agreement did not effect the wholesale price of compact disc. The record companies still sold the CD's to retailer's at the same price regardless of discounts the retailers might have offered, or chosen not to offer. With the current antitrust climate in Washington and with potential mega-mergers on the horizon for Warner Brothers Records and EMI records, the record companies had little choice but to sign on to the FTC deal.  

Besides Warner Brothers and EMI, the Sony Corporation of America, the Bertelsmann Music Group, and Universal Music and Video Distribution also agreed to the terms offered by the FTC in the settlement.

Taking the price point of compact disc prior to the record company intervention, some believe the consumer may experience CD prices saving of $2 to $5 on many popular titles. 
 

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