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[ARSCLIST] WSJ: Deadline Nears to File Claims In CD Price-Fixing Settlement
Deadline Nears to File Claims In CD Price-Fixing Settlement
By JENNIFER ORDONEZ
Staff Reporter of THE WALL STREET JOURNAL
[I filled it out. 'Twas easy enough.]
Some of the country's biggest record labels may owe you $20. But you might
not want to tell your friends.
In the 15 years since the LP's demise, the price of the CDs that replaced
them has been a source of grumbling among many music lovers. Now, some
relief is in store for millions of people in the form of a payout from a
The potential refund is the result of a long-spinning dispute over pricing
between record labels and some retailers. The issue: Were consumers hurt by
policies introduced in the mid-1990s that curtailed discounting of CDs at
retailers such as Best Buy, Circuit City and Wal-Mart? Some retailers
complained that if they advertised music at prices below the record
companies' so-called minimum advertised price, they risked losing millions
of dollars a year in promotional payments from record companies.
The dispute has resulted in a proposed settlement that is unusual even by
the standards of big class-action cases. It includes almost anyone who
bought music between Jan. 1, 1995, and Dec. 22, 2000 -- a period spanning
from the dying days of grunge to the zenith of teen pop. More than 4.1
billion albums were sold during that time, says Nielsen SoundScan. Anyone
who bought one, including kids and multiple members of the same family,
could be eligible for up to $20 per person.
You don't even need a receipt for what you bought. That will no doubt be a
boon to a lot of disorganized teenagers, but it also opens the door for
people who've never bought a CD. Each consumer is eligible for the same
amount, no matter if they bought one CD or 100.
But don't start counting your money yet. If too many people file claims,
music buyers could find themselves empty-handed. Under terms of the
settlement, if each payment amounts to less than $5 per person, all the
money designated for consumer refunds would instead be distributed to
nonprofit, charitable or government organizations for yet-to-be-determined
Joseph C. Kohn, a plaintiff's attorney on the case, estimates that awards of
$20 could be distributed if about two million claims are filed; if more than
eight million claims are submitted, no individuals will likely receive
money. By early January, only about 30,000 people had filed. But since then,
more than 1.8 million claimants have come forward, spurred by a publicity
campaign that included ads in magazines like Rolling Stone, National
Geographic and TV Guide.
The $20-per-person proposed settlement is based on several factors,
including an estimate that consumers overpaid about $1 per affected compact
disc and a desire not to have consumers show proof of purchase.
Despite the prospect of an easy windfall, many music lovers still haven't
yet heard about the dispute. Last week, hardly any of the hundreds of people
passing through Aron's Records, a Los Angeles record store, knew about it.
"I'm here like 60 hours a week and no one has said a single word," said
manager Richard Ellis.
There is still time to pursue a claim. Music buyers who file by March 3 --
either online or through the mail -- could end up with a piece of the $67.4
million that major music companies and retailers have agreed to pay to
settle the suit. An additional $75.7 million in compact discs is slated for
distribution to nonprofit organizations or public entities like schools and
Filing a claim online through www.musiccdsettlement.com is relatively easy,
although it requires personal information like your birthday, address and
the last four digits of your Social Security number -- thereby preventing
cheats from double-dipping. Claims can also be filed through the mail or by
calling a toll-free number and requesting a form.
The settlement follows an earlier investigation by the Federal Trade
Commission into CD pricing. The FTC eventually concluded in 2000 that U.S.
consumers overpaid as much as $480 million for music bought from 1996 to
1999 because of pressures on retailers to keep their prices above a certain
minimum. Soon after, attorneys general for 43 states and U.S. territories
brought a lawsuit against music companies and retailers accusing them of
fixing the price of compact discs.
Record companies and retailers in 2000 agreed to end the practices in
question. Separately, compact-disc prices have come down in the past year
for several reasons, including competitive pressure from movie DVDs that
often are sold for less than $20.
There are still some procedural hurdles. Though the proposed settlement has
preliminary approval, a final hearing in the District Court of Maine to
determine fairness isn't until May 22. Checks -- if there are any --
wouldn't likely get cut until summer's end.
Then there are the lawyers, whose fees still have to be approved: Attorneys
general and private attorneys for the plaintiffs have asked for $14.5
million in fees, or roughly 10% of the common fund.
With a month to go before the deadline, things are looking good for
consumers to walk away with at least some cash in their pockets, says Linda
Gargiulo, a lawyer handling the case for the New York attorney general,
which is leading the case along with attorneys general in Florida and
If the settlement is finalized, about 5.5 million compact discs will be sent
to schools, nonprofits and libraries, among other organizations. Record
companies were given strict guidelines about acceptable titles -- lots of
jazz, classical and pop records, and absolutely no albums stickered for
"We tried to stay away from the one-hit wonders," adds Lizabeth Leeds, a
lawyer handling the case for the Florida attorney general's office.
In the current case, both retailers and record companies have said they
broke no laws and they settled the suit in order to avoid a costly legal
The record-company defendants were Vivendi Universal's Universal Music
Group; Sony Corp.'s Sony Music Entertainment; Bertelsmann AG's BMG
Entertainment; AOL Time Warner's Warner Music Group; and EMI PLC's EMI
Recorded Music. Retailers named in the suit are MTS Inc., the parent company
of Tower Records; Musicland Stores Corp.; and Trans World Entertainment
Write to Jennifer Ordonez at jennifer.ordonez@xxxxxxxx
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