Eliot Spitzer Investigating Digital Music Price Fixing

from the as-if-no-one-saw-that-coming dept

Fresh off getting the customary fines out of the recording industry for still doing payola, it looks like New York Attorney General Eliot Spitzer is turning his attention to whether or not the record labels are involved in illegal price fixing for downloadable music -- and has subpoenaed Warner Music. Is this really that surprising? As we've been noting for months and months, Warner's head, Edgar Bronfman Jr. has openly been advocating illegal price fixing for Apple's iTunes by trying to force Apple to raise the prices of songs. Warner (and all the other music labels) have the right to charge whatever they want to the retailer (in this case Apple), but they should have no say in what Apple charges the consumer. Any attempt to set the final prices can be seen as price fixing, and yet it's exactly what Bronfman has been publicly stating for many months.


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  •  
    identicon
    Landon, Dec 23rd, 2005 @ 9:50pm

    No Subject Given

    The Attorney General is someone that we can rely on to fix things...

     

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    George, Dec 23rd, 2005 @ 10:20pm

    Cartel

    As I see it there are normally three channels leading to a sale:

    -Manufacture of the product,
    -Distribution of the product, and
    -Sale of the product

    If a cartel controls all three channels in an industry, who's to stop them from price fixing? As for the comments, they may be so accustomed to conducting business in such fashion that they just go unnoticed.

     

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    Noahfingway, Dec 23rd, 2005 @ 10:59pm

    spitzer for president

    FNA Right....Spitzer for prezident.

     

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    Anonymous Coward, Dec 24th, 2005 @ 1:38am

    Perhaps this is why he was conspicuous by his abse

    One thing I've noticed throughout the Sony-BMG fiasco is that I didn't
    hear from the NY attorney general.
    My best guess is that he's picking his spots. Going after the music
    industry with established trade law (for the payola and now price fixing)
    is probably simpler. These laws have established precedence-- e.g. it's
    been done before.
    OTOH, the laws governing computer usage isn't as well established.

     

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      Jason (profile), Dec 24th, 2005 @ 6:42am

      Re: Perhaps this is why he was conspicuous by his

      No, he was investigating it. I don't have the links handy, but I recall seeing a few articles on CNet and Slashdot about it. Something about how some of his people went out and bought some of the DMR protected CD's a week after Sony-BMG recalled them.

      Haven't seen anything recently.

       

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        ccc, Dec 24th, 2005 @ 6:51am

        Spitzer kicks ass

        Spitzer has my vote.
        A couple years ago I remarked to my republiconservative dad that I'm impressed that Spitzer has been going after all the baddies out there, and he said "he's just trying to get elected governor."
        Said it like that's a bad thing - trying to earn the public's trust and respect by doing good work, rather than making deals with the megacorps to buy your way in.

         

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          Anonymous Coward, Dec 26th, 2005 @ 12:12am

          Re: Spitzer kicks ass

          "he's just trying to get elected governor"

          Well, isn't that what we all say about politicians that we disagree with?

           

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      Mike (profile), Dec 24th, 2005 @ 11:58am

      Re: Perhaps this is why he was conspicuous by his

      One thing I've noticed throughout the Sony-BMG fiasco is that I didn't
      hear from the NY attorney general.


      He wasn't conspicuously absent. He went after Sony BMG also.

       

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      Mr Velvet, Dec 26th, 2005 @ 8:49pm

      Re: Perhaps this is why he was conspicuous by his

      All of these investigations will disappear as soon as someone makes the proper political contibution. It's called 'shaking them down' by organized crime. (Not that our gevernment would ever do that-or be compared to organized crime).

       

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    Elzeard, Dec 24th, 2005 @ 8:48am

    Corrption Everywhere

    One day, a news story irks you because it discloses some oughta-be-trustworthy person or group is just plain WORNG deep to the core.

    A while goes by, and you learn of another formerly trusted and admired provider acting purely out of greed and disdain for its customer base.
    You're shocked and awed to hear that the same attitude lives in the heart of a powerful leader who still wants the masses to see him as benificent, upright and personally likable.

    Mr. Bronfman has provided my personal "Last Straw". Warner may now consider its brandname, subsidiaries and any business associates to be on my "Plague List".

    I can no longer do my shopping with an eye out for just a couple of Corporate Villains to avoid. I think I'm going to have to adjust to shopping ONLY at places and for brands (or off-brands) that have proven their respect and good intentions toward their customers.

    Is there a clearinghouse for Corporate Goodness somewhere?

     

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      TJ, Dec 24th, 2005 @ 9:51am

      Re: Corrption Everywhere

      Closest thing I've seen to tracking corporate goodness is Business Ethic's yearly list of the 100 Best Corporate Citizens. I don't see any music labels of the list of course. The site explains what they track, but they don't apparently track use of anti-customer technologies, because Lexmark is listed despite their attempts to use digital chips and the DMCA to block third-party toner refills. It is interesting just how many high tech companies do at least meet all the list criteria including HP, IBM, Intel, Dell, etc.

      http://www.business-ethics.com/100best.htm

       

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    QuantumMechanic, Dec 24th, 2005 @ 9:33am

    huh

    seems like price fixing to me...damn I like Crowne Royal.

     

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    Landon, Dec 24th, 2005 @ 6:48pm

    Spitzer

    If he ran, I would vote for him. Seriously.

     

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    Michael "TheZorch" Haney, Dec 25th, 2005 @ 3:35am

    The landslide is getting bigger!

    I love how this all started with one event, the SonyBMG fiasco. Actually, this whole situation started long before that but it took this to finally make it public. Like a pebble thrown onto a hillside its started at landslide and I don't see it stopping anytime soon.

    This whole thing is the kind of major event that shakes up an entire industry, or destroys it. I don't see this as destroying the recording industry but I do see this as forcing the industry to change, kicking and screaming if need be. Some of that is already happening now, but its only an isolated effect. Thing will get worse for the RIAA, more people will come forward, more artists being cheated out of their fair share of the money will enter the limelight of the courts and then all hell will break loose. When the smoke from all of this finally clears the Recording and possibly the Motion Picture Industry will be very different.

     

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    Just one guy, Dec 25th, 2005 @ 9:20am

    Price fixing?

    What is clear to everybody here, I believe, is that by definition there is no stand in Bronfman jr's claim of price fixing by Apple: "Agreements between business competitors regarding the pricing of a product" requires by definition the existence of competitors (with an "s", that is to say, plural, more than one): Apple is just one music reseller, it can't do price fixing all alone. Especially if it is below cost for Apple itself.

    But it seems to me that in this case, Spitzer, too, does not have a case: you can't have price fixing if there is no competition. And in the case of record companies there is no competition at the consumers level, and there is no price fixing possible. Artists are natural monopolies, and assuming that the owners of exclusive rights of different artists practice competition based on price is just absurd: if I want the latest record by 50 Cents, I will not buy a collection of, say, John Denver's hits of the '70 instead, just because is cheaper.

    As long as record companies keep on holding their artists in locked exclusive contracts, there will be no possibility of competition based on price, and the record company owning of the rights of the latest hit single is justified in raising the record's price to whatever sum it cares, and nobody can object.

    Maybe it is really time for artists to take back the control of the distribution of their work?

     

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      Mike (profile), Dec 25th, 2005 @ 11:16am

      Re: Price fixing?

      Hmm. You may be confused about the potential charge here. The price fixing case isn't against Apple, but against the record labels for trying to set the price(s) that Apple must charge.

       

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        Just one guy, Dec 25th, 2005 @ 6:06pm

        Re: Price fixing?

        No, I guess I was not clear enough.

        The Apple bit was just an aside, expressing my understanding that Apple's pricing cannot be considered price fixing by the very definition of price fixing.

        My point is that, similarly but for different reasons, even the pricing of the record companies cannot be considered price fixing.

        We have price fixing when all (or a relevant portions of) the providers of some goods agree to set a price higher than necessary for their goods, preventing consumers (and resellers alike) to find the best deal, because they are all the same high price.

        So we have price fixing when theoretically you could do comparative shopping and find competing goods at different prices, but practically you cannot, because everywhere these goods cost the same due to a behind-the-scene agreement of the producers. Price fixing, therefore, only occurs when price is a relevant factor in the buying decision.

        But in this case, the record companies' natural monopoly on the artists' outcome implies that no competition can come to exist on the goods, because the different products can never be compared: one does not buy a record by Yanni only because it's cheaper than Shakira.

        So, whatever the agreements the record companies reach over the pricing of their records, this cannot be considered price fixing, because the final buying decision is not done on pricing, but on the artist's name alone.

         

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          identicon
          Andross, Dec 25th, 2005 @ 6:55pm

          Re: Price fixing?

          It is price fixing though, because what is happening is they are trying to make Apple raise the prices to the same as what they are making everyone else sell it at. So rather then the resellers getting together and deciding where to fix the price, the recording company is telling them all where to fix the price. Either way, it is still price fixing, because they are trying to set it at a fixed price.

           

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            Just one guy, Dec 26th, 2005 @ 2:38am

            Re: Price fixing?

            It is price fixing though, because what is happening is they are trying to make Apple raise the prices to the same as what they are making everyone else sell it at. So rather then the resellers getting together and deciding where to fix the price, the recording company is telling them all where to fix the price. Either way, it is still price fixing, because they are trying to set it at a fixed price.

            It might be their practice, it might be their purpose, it might be immoral, it might even be illegal (I don't know), but still it is not price fixing, and should not be prosecuted as such.

            Price fixing implies that there could be competition on prices that is actually prevented because of the behind-the-scenes agreement of the producers. This is not the case here.

            Suppose that record company A, owner of the rights over the records of hit artists X and Y, unilaterally raises their price, so that Apple does not feel like selling these artists in its Music Store anymore. In this case Apple cannot find two competing artists Z and W to sell at a cheaper price, because music lovers will look for X and Y, and not just any artist that is cheap enough to buy. The adverse effect on Apple's sales happens regardless of whether all record companies agree on a common retaliatory pricing policy.

            This is different than, say, peanut butter or chips, where the actual brand is only one of the factors for buying, and price has a large impact (and in many cases, the largest). Price fixing, as an illegal practice, has an impact only when price has an impact on the final decision on buying one specific brand over the competition.

            This is not the case here. Any other practice of playing the prices of my products can be immoral, even illegal, but is not price fixing.

             

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              Mike (profile), Dec 26th, 2005 @ 8:51am

              Re: Price fixing?


              It might be their practice, it might be their purpose, it might be immoral, it might even be illegal (I don't know), but still it is not price fixing, and should not be prosecuted as such.


              You're suggesting that there's simply no price elasticity in CDs? I don't believe that's true. While you're correct that one single artist isn't a direct replacement for another, plenty of people do buy one CD over another based on price. They plan to buy a CD, and look at two different artists they're interested in, and then buy the cheaper one.

              Either way, conspiring by a series of wholesalers to set the retail price is still considered price fixing. And by conspiring to set the retail price, it's price fixing in that it's decreasing the potential for overally competition in the market place between Apple and other digital music sellers.

               

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                Just one guy, Dec 26th, 2005 @ 4:32pm

                Re: Price fixing?

                Either way, conspiring by a series of wholesalers to set the retail price is still considered price fixing. And by conspiring to set the retail price, it's price fixing in that it's decreasing the potential for overally competition in the market place between Apple and other digital music sellers.

                Well, I'll be very interested to see what arguments the lawyers of the record companies will use when debating this case...

                 

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      Anonymous Coward, Dec 25th, 2005 @ 8:25pm

      Re: Price fixing?

      Ya, that is what MP3.com was for. At least until RIAA shut it down and then turned it into their whore.

       

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        Just one guy, Dec 26th, 2005 @ 2:14am

        mp3.com

        Ya, that is what MP3.com was for. At least until RIAA shut it down and then turned it into their whore.

        You still have www.allofmp3.com. It's Russian, outside of the reach of RIAA, and legal in Russia (as proven times and times again).

         

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    Anon, Dec 25th, 2005 @ 10:02pm

    Amen

    Amen to Spitzer. Hopefully this will be another blow for the dying dinasour.

     

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    identicon
    giafly, Dec 26th, 2005 @ 6:40am

    RIAA-free CDs

    Just one guy has already recommended allofmp3.com, so I'll mention this...

    "Not all record labels are members of the RIAA. A proud handful hold out, refusing to join in the cartel's backwards way of doing business. Sites like riaaradar.com help you sort the wheat from the chaff. The kids at FreeCulture.org have compiled these holiday gift guides to start you off. Each guide is a list of 10 great RIAA-free CDs. There's something for every taste, and you can find many of them in your local record store or online." - Guide Lists at freeculture.org.

     

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    identicon
    Thomas Bigodine, Feb 1st, 2007 @ 9:52am

    price fixing

    Well well well, if we dont have another case of a bigot trying to screw everyone else. Let me tell you a little something about Bronfman Jr., he reportedly has a little Jr. hot dog (for lunch of course). It is because of this fact, that he chooses to try and slam others right up the olde zoom tube iffin' you know what i mean. i say we boycott anything with the name Warner, Rothschild, attorney, Wal-mart, Sam's club or anything else that pretends to be for the people while they are shoving it up the people's anuses at the same time.
    Good day to you all and God bless!!!!

     

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