Lack Of Evidence Halts U.k. Oft Inquiry

An investigation by the U.K.'s Office of Fair Trading (OFT) into alleged illegal practices by major record companies has been closed because the government body concluded there is not any evidence to back the claims.

The OFT says it initiated the latest action—looking into the supply of CDs in Britain—when it received a number of complaints against the industry's biggest companies. Seven U.K. companies were named in the probe: BMG, EMI, Sony, Universal, Virgin, Warner, and the country's largest independent record distributor, Pinnacle. It was claimed they colluded to discriminate against retailers trying to import cheaper CDs from European Union nations.

The accused companies faced potential fines of hundreds of millions of pounds if they were found to have broken the law, as the OFT can impose penalties of up to 10% of U.K. sales for every year of infringement for a maximum of three years.

Officially, the OFT says there is "no current evidence that the law is being broken." But it found that certain record companies had engaged in practices designed to slow down imports from mainland Europe in the past but that this was before the Competition Act of 1998 and therefore did not fall foul of the law. It did issue a warning that the majors would face "strong action" if found in breach of competition law.

The OFT investigation was scheduled to take six months to complete but lasted 19 months. It was the sixth such governmental probe into the affairs of the British record music industry in a decade. Each of those investigations failed to find evidence that the music industry was breaking the law.

It is difficult to quantify the cost to the music industry, but from speaking to record company sources, Billboard estimates the collective cost of industry lawyers, financial directors, chief executives, and staff research time in complying with the OFT's requests for documentation reproduction was around £2 million ($3.1 million). Meanwhile, the OFT reveals it spent "about £100,000 ($155,000)"—a sum picked up by taxpayers.

Unlike a court case when an innocent party can ask for its costs to be reimbursed, no mechanism exists whereby the companies can reclaim their costs from the government.

Executives that Billboard approached were reluctant to talk on the record about the matter, but the British Phonographic Industry said it is "pleased that the outcome of the latest detailed investigation by the [OFT] will result in no action being taken against the record industry."