Ec Suspends Cd-pricing Probe

Music & Media

BRUSSELS—European record-industry executives returning from their vacations in late-August were greeted by the welcome news that the European Commission (EC) had suspended its CD-pricing probe.

In January, amid allegations of CD price-fixing, the EC launched five separate investigations into relationships between the majors and retailers. The 20-member EC serves as the executive body of the European Union. Its investigations found that, in Germany, three major record companies were "including minimum advertised prices in certain of their co-operative advertising agreements." However, an official statement notes that the unidentified companies have "subsequently ended these activities." Similar practices of a more limited scope were also identified at one major in Italy.

After informing the relevant national competition authorities—who will decide whether to take any further action—of the results of its investigations, the EC opted to suspend its inquiry. European competition commissioner Mario Monti had hinted earlier this summer that the probe would soon end.

The EC states, however, that "given the high degree of concentration in the industry, the Commission will continue to keep the industry under close scrutiny." The inquiry could be re-opened if additional information comes to light.

According to an EC spokesperson, "There was indeed some evidence that the companies had misbehaved, and they tried to control the retail prices of CDs through their agreements with retailers, but as soon as the Commission sent out questionnaires asking about the marking practices, those practices were terminated."

The major labels, which cooperated in the inquiry, have expressed relief at the EC's decision. In a statement, Universal Music International commented: "We are pleased to receive notification from the European Commission that, following a thorough investigation with which we cooperated fully, the CD-pricing investigation is now formally closed." Sony Music Entertainment Europe acknowledged receiving "formal notification that the European Commission is closing its investigation without action against the company."

Yet Helen Snell, a London-based media analyst at the ABN-AMRO bank, cautions that "it is not certain that the Commission has satisfied itself that it has got to the bottom of CD-pricing practices yet. The advent of the single European currency may make the situation more transparent from the consumer's perspective, but it will not alter the fact that it simply costs more to produce a CD in some European markets than in others. Whether or not record companies continue reflecting that in dealer prices remains to be seen."

The EC is continuing its separate antitrust inquiry into the regional coding system of DVDs. It notes that the U.K.'s Office of Fair Trading "has opened an investigation into allegations that the majors are restricting the import of CDs into the United Kingdom, in an attempt to maintain high retail prices in the U.K. This inquiry is different to, and separate from, the Commission's inquiry."



Emmanuel Legrand is editor-in-chief of Music & Media. Additional reporting by Lars Brandle.