File headline under Department of wishful thinking....
A judge ruled two big music firms misled investigators over how they learned about rivals' online pricing agreements.
A federal court ruling Friday highlights the pressure global music companies face on multiple fronts over whether they collude to set wholesale prices, particularly to online services.Judge Marilyn Hall Patel, of the U.S. District Court in San Francisco, found that two of the four big music companies, Vivendi Universal SA's Universal Music Group and EMI Group PLC, deliberately misled federal investigators by obscuring the degree to which they sought -- and gained -- information about their competitors' pricing agreements with online music services.
If they aren't successful in appealing the ruling, the music companies could be hurt in their efforts to fend off investigations by the Justice Department and by New York State Attorney General Eliot Spitzer, as well as a consumer lawsuit seeking class-action status, all of which focus on pricing collusion.
Judge Patel described Universal's efforts to gain information on competitors' pricing as an “ongoing unlawful scheme” which it sought to hide from Justice Department investigators and held that EMI, too, had misled investigators on the same issue. She ordered the companies to produce documents they had witheld either in whole or in part.
Big Music Firms Dealt a Legal Blow
From my vantage point, the large music companies are dinosaurs, more concerned with quarterly profit than with enabling musicians to create quality music.
After receiving documents from the music companies that appeared to show they had mechanisms in place to avoid conflicts that might have been created by their dual roles as owners and suppliers to the online services, the Justice Department closed that investigation at the end of 2003.But Judge Patel found that those filings were rife with omissions and misleading statements, and ordered EMI and Universal to deliver more complete documentation. Universal said it would appeal; an EMI spokeswoman called the ruling “mistaken.”
Last month, the Justice Department opened a new investigation into whether the companies colluded to set prices for digital music, which is now sold online by companies including Apple Computer Inc. and Yahoo Inc. Friday's ruling is likely to bolster that investigation. Both the current Justice Department investigation and Mr. Spitzer's probe focus on the companies' use of “most-favored nation” clauses, which can be used to ensure that a supplier receives terms at least as favorable as those of any competitors. Judge Patel slapped Universal for playing down its use of the maneuver in its earlier filings to Justice Department investigators. Gina Talamona, a spokeswoman for the Justice Department's antitrust division, declined to comment on the ruling.
In March, after the Justice Department launched its new investigation, a group of consumers filed a lawsuit alleging the companies stymied the growth of the online music market and fixed prices to protect their CD businesses. Their lawyer cited the original Justice Department investigation, saying he planned to show the labels hid information from the department.
Ironically, Friday's ruling was issued amid arguments in a lawsuit brought by EMI and Universal, among others, in which they claimed the original Napster Inc. and its financial backers violated their copyrights by allowing users to trade their music free of charge online. In a related ruling Friday, Judge Patel found that Bertelsmann, a defendant in the lawsuit, thanks to a multimillion investment it made in Napster, had also witheld documents with the potential to expose its culpability in the copyright infringement matter.
Tags: corruption, /litigation, /music
