– A federal appeals court has reinstated a lawsuit that alleges the major
record labels have engaged in the fixing of prices and terms for selling music
online, according to published reports. While a lower federal court dismissed
the antitrust claims in October 2008, the U.S. Second Circuit Court of
Appeals in New York
said that the allegations are "sufficient to plausibly suggest" a
conspiracy among the major labels, Reuters reported.
The plaintiffs in the case
— a combination of nearly 30 lawsuits brought between 2005 and 2006 — argued
that the labels agreed to a wholesale price of 70 cents per song, and enforced
this artificial price floor through licensing agreements.
The court said
that "some form of agreement among defendants would have been needed to render
the [online music] enterprises profitable," according to Reuters’
The Second Circuit noted that eMusic was charging 25 cents per song,
and none of the major labels would do business with them, according to AP coverage. Coincidentally, Warner Music (NYSE: WMG) signed a licensing deal with eMusic yesterday, and
the company had also recently struck a deal with Sony Music.
Defendants in the case include Bertelsmann,
EMI, Sony (NYSE: SNE), Time Warner (NYSE: TWX), Vivendi and Warner Music Group.
What the article isn’t pointing out is that eMusic recently changed their pricing, nearly doubling the reported 25 cents per song. Could this also be why Warner made the deal?