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Labels charged with price-fixing – again

Cough it up for The Three Tenors

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A pair of major music labels have been hit with another round of price-fixing charges courtesy of the FTC - a decision which raises the question as to who exactly is to blame for falling music revenue.

In a unanimous decision, members of the U.S. FTC (Federal Trade Comission) chastised Vivendi Universal and Warner Communications for restricting competition in the sale of "The Three Tenors" - Jose Carreras, Placido Domingo, and Luciano Pavarotti - audio and video products. It seems that PolyGram (a company later bought by Vivendi) conspired with Warner "to curb discounting and advertising to boost sales of recordings that the two companies jointly had distributed based on the tenors' concert in Paris during the 1998 soccer World Cup."

Based on these practices, the FTC has arrived at a stunning ruling.

"The Commission's order bars PolyGram from agreeing with competitors to fix the prices or restrict the advertising of products they produced independently."

The labels deny any wrongdoing, which should not come as a shock. The labels also denied earlier charges from the FTC of a much larger price-fixing scandal that cost consumers an estimated $480 million. The pigopolists agreed to settle that little incident by paying 41 suing states $67.4 million in cash and offering $75.7 million in CDs.

How many price-fixing scandals will it take before the government begins to question how serious the labels' losses to P2P file trading really are? Do grandparents and children pose more of a threat to the music industry than its own executives?

Even a cursory glance over the labels' sales figures for the last decade (PDF) show that music sales have held up far better than products from a number of industries - most notably IT.

As the tech industry imploded between 2000-2001, the labels saw revenue decline but 4.1 percent. From 2001-2002, music and DVD sales combined fell only 8.2 percent, and this is during a worldwide economic slump.

The labels' biggest losses, by far, come from a staggering drop in cassette, LP and vinyl sales.

A down economy and more competition in CD prices would seem to account for a large chunk of the downward revenue trends.

Also, keep in mind that the labels enjoyed tremendous growth throughout the 1990s - the prime price-fixing years, according to the FTC. Sales in 2002 were almost twice that of sales in 1993. Few industries have enjoyed such success.

Wouldn't it be tragic for the RIAA (Recording Industry Association of America) to put a stop to P2P technology because a few multi-national conglomerates can't milk consumers as in times past? As the economy begins to show signs of recovery, keep a close on those music sales figures. Don't be surprised to see them rise again with or without P2P's help. ®

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FTC statement

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