"...Record companies should pay back millions of dollars in illegal profits they collected by forcing discount stores to raise CD prices in 1995, attorneys general for 28 states alleged in a lawsuit Tuesday. The music companies maintain that they threatened to stop supplying discount chains with thousands of advertising dollars in the mid-1990s because the chains were selling CDs at below wholesale cost, driving some record stores out of business. They indicated Tuesday that they would contest the lawsuit.

The lawsuit comes three months after the five major music distributors, while admitting no wrongdoing, settled Federal Trade Commission charges they unfairly inflated CD prices. Under that deal, the companies agreed to discontinue minimum advertised price programs that forced retailers to sell music CDs at or above a set level in return for getting substantial advertising funding.

The lawsuit by the states essentially does what the FTC promised not to do in its settlement deal: seek damages for past pricing tactics. But the attorneys general said they were seeking damages on behalf of the consumers they represent. They said the record companies in February 1995 conspired to force several large discount retailers to raise prices after the retailers bought CDs in such large volume that they could undercut the prevailing high retail prices.

"The purpose of the illegal agreements was to raise prices and reduce retail price competition which threatened the high and stable profit margins for CDs enjoyed by both the defendant labels and distributors and many music retailers," the lawsuit said..." NULL