The lawsuit stemmed from the alleged anti-trust practice of the labels who were accused of price fixing the cost of CDs with major music retailers. The retailers in question Musicland's Sam Goody, Tower Records and Trans World Entertainment entered into an agreement with the major record labels in the early 90’s to employ a policy called "minimum advertised pricing," a co-opt advertising model where the labels agreed to pay part of the advertising costs for CDs in the retailers ads if the retailers agreed to sell the CD above a set price. 

This move was employed when major electronic retailers like Circuit City and Best Buy began selling music CDs below cost as an inducement to attract customers to their stores where it was hoped they would also shop for higher ticket items.  

In the federal class action suit brought against the retailers and major record labels in August of 2000, State prosecutors claimed that the "minimum advertised pricing" practice was in fact price-fixing, which violated federal antitrust laws as well as the antitrust laws of several states because this practice reduced competition and artificially inflated prices for consumers. 

"This is a landmark settlement to address years of illegal price-fixing," New York State Attorney General Eliot Spitzer said in a statement on Monday. "Our agreement will provide consumers with substantial refunds and result in the distribution of a wide variety of recordings for use in our schools and communities."

The agreement calls for the retailers and record labels to cease using the "minimum advertised pricing" practice and pay $67.4 million in cash that will be used to refund consumers who overpaid for music CD from 1995 through 2000. They also agreed to donate $75.7 million worth of CDs to charities, public schools, libraries and hospitals in all 50 states, according to a MTV news report.  

As for the refunds, just how consumers will be able to take advantage of this settlement is not known at the moment. The MTV report says, “Prosecutors will make announcements later to inform consumers how to file claims.” 

Although they have settled the lawsuit, part of that settlement agreement states that neither the record companies or retailers admit to wrongdoing.  Below are part of the statements issued by WEA and Universal Music Group concerning the settlement. 

Warner-Elektra-Atlantic
"We deny any wrongdoing. We have made a business decision to settle these matters and avoid continuing with expensive and protracted litigation. The settlement made sense to us from a business perspective, and enables WEA to put this matter behind us."

Universal Music Group: 
"We believe our polices were pro-competitive and geared toward keeping more retailers, large and small, in business. Continued litigation would only consume millions of dollars of company resources at a time when UMG's executive energy and business focus are better spent providing consumers with compelling music. Balancing all the factors involved including the complexity of the issues, we believe the settlement is the most prudent business decision."
 

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