Retail Track: Why Sony Thinks Narm Suit Should Be Dismissed

ON MARCH 17, Sony Corp. of America and Sony Music Entertainment, defendants in the antitrust lawsuit brought by the National Assn. of Recording Merchandisers (NARM), responded to the trade association's complaint by filing a motion to dismiss the case.
The response-filed by the defendants' law firms of Cahill Gordon & Reindel, with offices in New York and Washington, and Rosenman & Colin LLP, with offices in New York-seeks to have the case dismissed in a number of ways.
Among the reasons why the NARM suit should be dismissed, according to the Sony response, is that NARM, in filing the lawsuit, is suing one of its own members-Sony-apparently on behalf of some subset of its other members, which effectively makes Sony a plaintiff and a defendant in the lawsuit. NARM's role is to advance the common interests of its members rather than to become involved in commercial disputes among its members by suing one member on behalf of other members, the response states.
It further argues that since interests represented in the lawsuit are not collective, NARM does not have associational standing to sue Sony, so the present dispute is outside of the court's jurisdiction.
Moreover, the response points out that a large part of the NARM lawsuit is based on action that the association anticipated would happen if the CDnow/Columbia House merger had been completed. Since that merger is terminated, and NARM passed on the chance to amend its lawsuit to take the termination into consideration, many of NARM's claims are moot, which Sony says is another reason to dismiss the trade association claims.
Furthermore, because the NARM complaint is largely based on anticipated conduct, its claims "are not ripe for adjudication," the Sony response points out.
A fundamental flaw in the NARM lawsuit, the Sony response asserts, is that it doesn't prove that the company's actions cause injury to competition, an essential element of proving an antitrust claim. Antitrust laws are designed to foster competition, not to protect individual competitors. Increased competition from new competitors, including Sony, is not antitrust injury. Since the only injury the NARM complaint alleges is competition from Sony, that is also grounds for dismissing the lawsuit, Sony's response contends.
Another key component of the NARM lawsuit revolves around the issue of "tying," in which NARM alleges that Sony's use of blow-in cards and hyperlinks to Sony-controlled online stores are unwanted product that retailers are forced to take with albums issued in the enhanced form.
But since Sony doesn't sell the components separately or charge for them separately, and there is no proof of consumer demand for the separated products, NARM has not proved the elements to establish tying, the response states. Without two separate products there can be no tying, so that claim should be dismissed, the Sony response argues.
Alan Malasky of Jenkens & Gilchrist, the law firm representing NARM on the matter, says, "We have carefully reviewed the Sony response, and we believed it to be without merit. We will file our response on behalf of NARM in the next several weeks."

SHUFFLING THE DECK: Tower Records/Video/Books is reorganizing its field management staff. The company is downsizing its 11 slot regional managers to four territorial directors, naming Steve Harman, based in New York, to oversee the East Coast; Bill Duffy, based in Chicago, to oversee the Midwest; Wayne Ennes, in San Francisco, to oversee the Northwest; and Bob Feterl, in Los Angeles, to oversee the Southwest, which mainly includes the Los Angeles area and Southern California, Hawaii, Phoenix, and Las Vegas.
In addition, the company will similarly restructure its loss-prevention staff going from the regional set-up to the territorial set-up. But in addition to reducing staff, the reorganization will create new positions. Tower will now have 11 regional product managers who will oversee music and video, as well as four territorial book product managers who will oversee the book category in the chain's music stores.
Chairman Russ Solomon says the reorganization will "absolutely reduce overhead," which likely will be good news to bond holders, who recently saw Tower's debentures investment rating downgraded by Standard & Poor's (Billboard, April 1). But Solomon says the "main motivation is it will accomplish a much better system of management."

SHUFFLING THE DECK: In the Universal Music Group, a little game of musical chairs is being played out. Charmelle Gambill, VP of sales at the Island/Def Jam Music Group, will move back home to Florida to become Universal Music and Video Distribution (UMVD) regional director, replacing Rob Coble who moves back to Los Angeles to become the marketing manager there.
Of the changes, UMVD president Jim Urie says, "Coble is the best marketing executive among the regional directors, and Los Angeles is too crucial to not have a marketing manager."
Coble replaces Jimi Wills, who left the company in December. No word yet on who will replace Gambill.