Music Download Pricing Lawsuits Pending?

larry bagina writes "New York Attorney General Eliot Spitzer has subpoenaed Warner Music Group, apparently looking into allegations of price fixing with Sony/BMG, EMI, and Vivendi, and apparently more subpoenas are in the pipeline. 'As part of an industrywide investigation concerning pricing of digital music downloads, we received a subpoena from Atty. Gen. Spitzer's office as disclosed in our public filings. We are cooperating fully with the inquiry.'"

This holiday season ...

[Catamaran]

remember downhillbattle [downhillbattle.org] and EFF [eff.org]. They are fighting for your rights.

NYTimes Article With Additional Details

[Furd]

Pricing of Downloaded Songs Prompts Antitrust Subpoenas [nytimes.com]

The New York attorney general, Eliot Spitzer, is investigating whether the four record companies that dominate the industry have violated antitrust laws in the pricing of songs that are sold by Internet music services, according to people involved in the inquiry.

Mr. Spitzer's office recently began serving subpoenas on the major record companies - the Universal Music Group, a unit of Vivendi Universal; Sony BMG Music Entertainment, a joint venture of Sony and Bertelsmann; the EMI Group; and the Warner Music Group, according to people involved.

Warner Music disclosed yesterday in a regulatory filing that it had received a subpoena on Tuesday in connection with "an industrywide investigation" into whether the companies colluded in the pricing of music downloads.

Representatives for Warner and Sony BMG said their companies would cooperate with the investigation. Representatives for the other major companies could not be reached or declined to comment.

Re:The New York AG?

[WCMI92]

"Does he even have jurisdiction for this? Isn't this a federal matter?"

Sure he does. So long as ONE person in his state has been victimized by RIAA price fixing.

Re:The New York AG?

[darkmeridian]

The Sherman Act gives state AGs the power to sue on behalf of its affected citizens as parens patriae. Private parties affected by anticompetitive conduct can also sue, but consumers in general ordinarily do not have a cause of action.

Re:why warner

[darkmeridian]

If I recall correctly, Warner has a significant marketshare and tends to be the "market leader". Also, it tried to fix prices on certain Three Tenors recordings. That might be why they're on a short leash. [ftc.gov] Surely, if the subpoenas lead to anything, others will also get supoenas.

Spitzer has been doing this for a while now

[goombah99]

The L.A. Times is reporting [latimes.com] that Warner Music Group disclosed that "As part of an industrywide investigation concerning pricing of digital music downloads, we received a subpoena from Atty. Gen. Spitzer's office..,". N.Y atty. Gen Eliot Spitzer, fresh from multi-million dollar settlements in the radio payola law suits against the industry giants, is now examining if there is collusion on the wholesale price of digital music. Spitzer is also at the heart [cnn.com] of the recent 50 million dollar lawsuit by the Beatles against EMI. It's hard to say if this helps or hurt's Apples case for a 99cent price cap on downloads.

price fixing?

[pintomp3]

wouldn't be the first time http://www.usatoday.com/life/music/news/2002-09-30 -cd-settlement_x.htm [usatoday.com] I remember a case back in the late 90's where I got a small check.

Re:who'd have thunk it?

[TubeSteak]

Innocent until proven guilty is a legal construct.

"Alleged murder" is not a crime. "Murder" is.

One of the main reasons we (as a society) go along with the fiction of "innocent until proven guilty" is to avoid prejudicing the potential jury pool.

Anyways, those two linked articles are very light on details.

Re:NYTimes Article With Additional Details

[TubeSteak]

Well... the part you quoted brings no new information to the table.

I'm not sure why both the nytimes and the latimes bring up Apple & iTunes unless they're trying to suggest that the music companies are being investigated for colluding on the (future) wholesale prices of tracks they'd like Apple to sell.

The "industry-wide" investigation likely centers on whether the four major record labels colluded to set the pricing of song downloads on iTunes and other online music stores. Currently, songs are usually priced at a flat 99-cent rate, but the industry has pushed for higher prices.

A Different Article [betanews.com]

I wonder if those music studios have industrial strength paper shredders or full fledged burn rooms at their corporate headquarters?

Re:I've got karma to burn...

[kaleposhobios]

um, guys...

Posting such a controversial stance to Slashdot is admirable. I hope your Karma doesn't suffer from all the pro-RIAA moderators here

it was sarcasm...

Re:Man I'll miss Spitzer when he becomes gov(NY)..

[Starker_Kull]

While I like some of the things he has done, he also can be a grade-A asshole. He decided that AIG, the Starr Foundation, Hank Greenburg, and a few others responsible for building up AIG over the last 40 years were criminals, and so prosecuted them to get evidence for his suspicions.... and he is still looking for that pesky evidence, and gosh darnit, he hasn't found it yet. AIG has restated their earnings for the last 5 years (which is a massively big deal, for those of you who don't know), and in doing so, changed their estimated net worth from about 81 billion to 79 billion. Whooo-fucking-hooo. He is now trying to investigate transactions made between AIG and the Starr Foundation going back to 1967 in order to find something to justify the ruining of the lives of lots of people at those companies.

Don't get me wrong - I hate abuses by large corporations, and I think he has done many good things to protect consumers. But he has a large ego, and doesn't know when to quit. I think he was hoping AIG was the next Enron, and when it turned out it wasn't even close, he got vicious and couldn't let it go, despite the fact he is hurting a lot of innocent people in the process. Of course, I am a bit biased, since I personally know some of the people whose careers he has ruined and finances he has messed up.

He's better than many, but he ain't no saint.

Re:Well, there is price fixing . . .

[Shoten]

I think you don't understand what "price fixing" means, in terms of the Sherman Anti-Trust act. It doesn't mean that a vendor can't set their OWN price for something...how else would they operate? It means that multiple companies in an industry (that are competitors with each other) can't collude to agree on prices. The point is that if all of these companies get together and say, "Yeah, I won't give iTunes access to our music if you don't give them access to your music, and he doesn't either, except if they agree to our pricing model" then the competition between them is reduced to a cartel. As a result, a de facto monopoly results, which is bad for consumers.

Re:Spitzer is looking for publicity

[utlemming]

Very true. Even if you are one of the cynics and are stating that he is doing this to get younger votes, he probably is starting to really tick off Sony BMG. Afterall, he filed a class action lawsuit over the Sony Rootkit fiasco, and now he is looking into price fixing. Makes you wonder why he is out to get them, but it sure is nice to see a politician finally going after these guys. And the fact Sony BMG is squarely in his sights is really nice. If I was an exec over at Sony I would start looking at finding out when his term is up, and start looking at funding a potential person to run against him -- get him out of office, or get someone in Albany to cut his budget or something so that he couldn't pursue it. But I am all for it. I am really glad to see that states AG's are starting to treat RIAA like the scum they are.

Re:Who'd have thunk of this interesting developmen

[platypussrex]

The cost of downloading a song on the Internet is pennies

but the cost of processing the transaction is not nearly as cheap. Google for terms such as micropayment and you'll see what I mean. This is one of the biggest challanges to cheaper pricing in general.

Spitzer is a loose cannon

[kalel666]

Drunk on the power of his office, and vindictive. Here's a nice little interaction he had with a former chairman of Goldman Sachs:

Last April, The Wall Street Journal published an op-ed piece by me titled "Mr. Spitzer Has Gone Too Far." In it I expressed my belief that in America, everyone -- including Hank Greenberg -- is innocent until proven guilty. "Something has gone seriously awry," I wrote, "when a state attorney general can go on television and charge one of America's best CEOs and most generous philanthropists with fraud before any charges have been brought, before the possible defendant has even had a chance to know what he personally is alleged to have done, and while the investigation is still under way."

Since there have been rumors in the media as to what happened next, I feel I must now set the record straight. After reading my op-ed piece, Mr. Spitzer tried to phone me. I was traveling in Texas but he reached me early in the afternoon. After asking me one or two questions about where I got my facts, he came right to the point. I was so shocked that I wrote it all down right away so I would be sure to remember it exactly as he said it. This is what he said:

"Mr. Whitehead, it's now a war between us and you've fired the first shot. I will be coming after you. You will pay the price. This is only the beginning and you will pay dearly for what you have done. You will wish you had never written that letter."

I tried to interrupt to say he was doing to me exactly what he'd been doing to others, but he wouldn't be interrupted. He went on in the same vein for several more sentences and then abruptly hung up. I was astounded. No one had ever talked to me like that before. It was a little scary.

It's up to others to make their own conclusions. I have only set out here what happened.

Mr. Whitehead, former chairman of Goldman Sachs, is chairman of the Lower Manhattan Development Corp.

Re:A Genuine Question...

[sabat]

It's one thing to set your own prices. This works in an open market because other people can come along and offer a better price (if your price is too high).

But when there are limited players (a small handful of sellers, like in the record industry) and they collude to set their prices higher, that's illegal -- and it breaks the marketplace.

Of course, what ultimately fixes the whole situation is better competition, and that's coming. Musicians don't really need traditional publishing and distribution anymore. Once the practice of developing a fanbase and breaking bigtime really takes off, the dinosaurs will die. And they know it, btw.

Re:Like that other time they got caught price fixi

[shark72]

Right; that judgement was a win for Wal-Mart and Best Buy. Wal-Mart and Best Buy went to the government when Universal was handing out program money (funds for newspaper advertisements and the like) to Tower Records and TWE in return for setting MAPs (minimum advertised prices). The only result was that the record companies ended their MAP programs. You only theoretically saved money if you'd bought CDs at Tower Records.

Many Slashdotters are under the impression that the price fixing settlement was a win for consumers, when in reality it was a loss for independent record stores, and a win for Wal-Mart and Best Buy, who get to keep selling CDs as loss leaders without worrying about stores like Tower (which subsequently filed for bankrupcty) and other dedicated music stores from being too much of a problem. Actually, if you're a fan of the mainstream music that Wal-Mart and Best Buy dole out, then it's a win for you, but I don't count myself in that crowd.

Re:A Genuine Question...

[Ohreally_factor]

Price fixing isn't when a single company sets a price. It's when all the businesses of an industry get together to set an artificially high price.

If you are company A, you can set any price at all you like for the widgets that you sell. However, if you price too high, you won't sell any widgets, thus you won't make any profit. The market place is where we determine what is the optimum price for your widgets: How much people are willing to pay vs. how much you want to charge. Of course, you are also competing with Company B, Company C, etc. who all sell competing widgets. So your price for your widgets must compete with the prices for the other widgets. (or you must find a way to differentiate your widgets, but that gets into other areas).

Now, what if you were to get together with the heads of Company B, Company C, etc., and say, "Hey, guys. We're killing each other. Let's set a price for widgets above what we're being forced by all this competition to charge. That way, we'll all be sure to reap lots of profits!" So, your company, Company B, Company C, etc. all set artificially high prices, thereby unfairly depriving the consumer of lower prices from competition.

That's the basics of price fixing. It's an unfair business practice.