EC Targets Music Club Players for Price Fixing

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The European Commission's upcoming probe of alleged CD price fixing in Europe among the music business' big players -- EMI, Warner, BMG, Sony and Universal -- is for real, and it could hurt music club business in the European Union.

Mario Monti, the commissioner in charge of EU competition, has a reputation as a tenacious investigator. Also, Alastair Tempest, director general of the Federation of European Direct Marketing and the industry's chief lobbyist in Brussels, said the EC's competition department attracts the best people.

He noted that Monti already had forced the combined AOL-TimeWarner entity to abandon hopes of acquiring EMI. Nor has Thomas Middelhoff, Bertelsmann's CEO, acquired the company that would have made BMG an even bigger player. Instead, Middelhoff went after Napster.

All of the music industry's major firms have record and CD clubs in Europe, Tempest noted, and there is little doubt that if price fixing charges stick, the club business would be hurt. Tempest believes that Monti has a strong case.

"It could affect the whole market for CDs in ways we may not even imagine as yet," Tempest said.

If, as a result of the EC investigation, CD prices drop in European retail outlets, clubs would have to go lower still. The majors could survive such price-cutting, but smaller club labels may not.

That, in turn, could strengthen the control of large music companies, something Monti does not want to happen. That could slow resolution of the case. The European Commission is not noted for speedy action.


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