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Attorney General Lockyer Announces Start Of Free CD Distribution To Libraries, Schools And Colleges

Settlement Of Price-Fixing Lawsuit Provides 665,000 CDs Valued At $9 Million
Monday, April 25, 2005
Contact: (415) 703-5837

(SACRAMENTO) – Attorney General Bill Lockyer announced more than 1,200 California library districts, school districts, colleges and universities today will start receiving 665,000 free compact discs (CD) valued at $9 million from the settlement of a price-fixing lawsuit that also provided consumers $67.4 million in refunds.

"Music adds great value to our lives, and these free CDs will substantially benefit our children, students and communities," said Lockyer. "This is a fitting end to a case brought to hold accountable music distributors and retailers who conspired to stifle competition and inflate prices for consumers."

The CDs encompass a wide variety of genres, including pop, hip-hop, rock, jazz, blues, country, Latin, classical, children's songs and show tunes. Under the allocation formula, 171 library districts will receive 55 percent of the CDs, 960 K-12 school districts will receive 40 percent, and 93 college districts and universities will receive five percent.

Each K-12 school site will receive an average of 29 CDs, while libraries will obtain roughly 65 percent of the pop titles. Libraries are receiving the most CDs and pop titles because they serve the largest general public population.

The CDs include titles with parental advisories about lyrics that may not be suitable for children. None of those titles, however, will be distributed to K-12 schools.

Nationwide, the settlement required the defendants to distribute some 5.6 million free CDs valued at approximately $77 million. The CDs already have been distributed in most other states. Lockyer delayed the distribution in California to correct problems experienced in other jurisdictions.

The most significant correction addressed incidents in other states that saw recipients receive extraordinarily high numbers of copies of one title. The California distribution addresses that problem in two ways. First, it spreads distribution of the highest-volume titles across the three recipient groups based the overall number of recipients. Second, it features a sliding scale that allocates a greater number of multiple copies to larger recipients. So, for example, the Los Angeles Unified School District will receive more multiple copies than the Yuba City Unified School District.

Lockyer's office obtained lists of public library and school districts from the state Department of Education and California State Library, respectively. Lists of colleges and universities were provided by the offices of chancellors and presidents. Lockyer then sent to all entities on the lists notices inviting them to participate, and disseminated follow-up reminders as well. All entities that responded are receiving CDs.

The CD shipments will be arriving over the next five to six weeks. Details on the CD distribution to specific school districts, library districts, and college districts and universities can be found on the Attorney General's web site at www.ag.ca.gov/musiccd . Click on Frequently Asked Questions (FAQ), then click on question number two.

The $144.4 million settlement also provided $67.4 million in refunds to more than three million consumers nationwide. In California, 385,637 consumers received refund checks of $13.86. The refunds were distributed in 2004.

Lockyer and the Attorneys General of 39 other states and three territories brought the antitrust lawsuit against five of the country's largest CD distributors and three national retail chains. The defendants included: music distributors Bertelsmann Music Group, Inc., Capitol Records, Inc. (EMI Music Distribution, Virgin Records America, Inc. and Priority Records, LLC, Warner-Elektra-Atlantic Corporation, Sony Music Entertainment, Inc., Universal Music Group; and retailers Transworld Entertainment Corporation, Tower Records and Musicland Stores Corporation.

The complaint alleged the defendants entered illegal conspiracies to set minimum prices for CDs. Under the alleged scheme, the distributors subsidized retailers' promotional costs of selling CDs if the retailers agreed to charge minimum advertised prices dictated by the distributors.

To prevent similar misconduct in the future, the settlement reforms the defendants' business practices. Among other provisions, the settlement bars the defendants from entering agreements designed to maintain or control the price at which retailers can sell music CDs. Additionally, the settlement prohibits the distributors from terminating business relationships with dealers or retailers who fail to sell music CDs only at suggested retail prices.

Besides California, other states and territories that entered the settlement include: Alabama, Alaska, Arizona, Arkansas, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Mississippi, Montana, Nevada, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, Northern Mariana Islands, Puerto Rico and the Virgin Islands.

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