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San Diego lawyers and class action specialists Lerach, Coughlin, Stoia, Geller, Rudman and Robbins are taking action against the big music labels who they accuse of conspiring to fix the price of music downloads.

William Lerach's suit alleges Bertelsmann, EMI, Time Warner and Universal worked together to fix the price of downloads. The suit claims the major labels "use their market power to coerce online music retailers to sign "most favored nation" agreements that specify that the retailers must pay each of the defendant labels the same amount. By setting a wholesale price floor at $0.70 per song, defendants have fixed and maintained the price of online music at supracompetitive levels."

The suit also claims that the music industry's initial online offerings were deliberately rubbish and designed to damage the nascent market for downloads. Red Herring says Musicnet and pressplay "were not serious commercial ventures, but rather attempts to occupy the market with frustrating and ineffectual services in order to head off viable Online Music competitors from forming and gaining popularity after Napster's demise", according to the suit. More details here.

The case will be closely watched by regulators elsewhere. Late last year it emerged that New York Attorney General Eliot Spitzer was investigating the price of downloading music.

Lerach, Coughlin, Stoia, Geller, Rudman and Robbins specialises in class action cases - it represented 15 customers who took anti-trust action against Microsoft. ®

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