Record Labels? Collusion? You Can't Be Serious

from the who-you-gonna-call-trustbusters dept

It's no secret that some record labels advocated price-fixing for downloaded music, believing for some reason that they should be able to control the retail, as well as wholesale, price of the music they sell to Apple -- something that's attracted the attention of New York Attorney General Eliot Spitzer. But perhaps he won't stop there, as executives from digital-music allege anticompetitive behavior by the labels in subscription-based music services as well. They say the labels engage in a "passive form of collusion" based around so-called most favored nation status contracts. These contracts basically say that a particular label's music will always command the best wholesale price. If they agree to supply music to a service at a particular price, then another label comes along and gets a better deal, the label with MFN status has to then get the better deal as well. The problem then comes about when all the major labels have these deals, as they do now, eliminating any sort of competition. Additionally, at least one label is trying to get the contracts it signs with subscription services to allow it to look at the deals its rivals have made with the company. These MFN deals do away with the need for any tacit collusion, ensuring it contractually instead. The labels may not be getting together in smoke-filled rooms to figure out what their prices will be, but that's because it sounds like they don't need to.

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