MAP RULING LEADS TO COURTROOM

As expected, the civil suits have started against the Big Five. Two suits brought by James John Retzlaff and David Jenkins "on behalf of California indirect purchasers of prerecorded music compact discs" named BMG, Capitol, Sony Music, Time Warner and Universal Music as defendants.

When FTC Chairman Robert Pitofsky made the agency's findings on "Minimum Advertised Price" policies public last week, the major record groups braced themselves for what they felt was the inevitable--class action civil suits. And Pitofsky certainly paved the way with the broad statement that MAP policies had cost consumers $480 million since 1997. How Pitofsky came up with the formula that gave him that exact number remains a mystery to industry insiders.

This comes as no surprise to anyone in the business. The consent decrees signed by the majors two weeks ago could easily be construed to be admissions of guilt to price-fixing. It was only a matter of time before the civil suits started, especially on the heels of the suit brought last week in the UK by the Mischon de Reya law firm and US attorney Michael Hausfeld, whose track record includes huge awards won from Exxon (over the Exxon Valdez oil spill) and Texaco. The UK suit named Bertelsman, EMI, Sony, Time Warner, Universal and alleged a conspiracy between the majors to artificially inflate CD prices.

In signing the consent decrees, the major record groups obviously had to decide whether to battle the FTC or the class action suits in court. If they fought the FTC and lost, the civil actions would have come anyway. So it seems they just cut to the chase.

In related news, Circuit City has now started referring to CDs as "value addeds."