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Price Fixing By People That Should Know Better

Mar 3, 2008
A storm is brewing in the US music industry regarding a price fixing issue. Attempts are being made to create a music subscription site that has already attracted the interest of the top four music labels. Aware that less and less people are using music shops, companies are looking to secure a decent download method but have run into problems when it was suggested that a price had been discussed.

It is purely this fact alone, the fact that a set price has allegedly been brought up, that puts the companies in hot water with concerns that fixed prices go against the competition laws. The US Department of Justice are instigating an enquiry to find out whether or not rules have been broken.

The fact that there are so many music companies with music shops and download sites, means there is always competition and this keeps prices low with consumers having the option to shop elsewhere. If the companies get together on one site, one price will be set and cover music from all the music producers involved, thus doing away with the competitive streak.

Universal Music are the company at the head of these ideas and this is what authorities don't understand. Universal are a long established face in the music industry with music shops and top artists galore, therefore they should know better than to try and arrange a price fix.

Universal Music have had a long standing contract with Apple itunes as a medium for selling their music other than through music shops. They have, on several occasions, requested control over their own prices and this has continually been refused by Apple. Because of this, Universal are considering not renewing their contract and this is just one of the alternative methods they are looking at.

Despite rumours that a set price of $5 for unlimited downloads was discussed during the music industry's meetings, there is no definitive proof and therefore nothing can be done. Universal deny that a price was even brought up in discussions but the Department of Justice will be keeping a very close eye on proceedings.

Universal have not only discussed this possibility with their competitors but have also sounded out other online arenas such as Google, Facebook, Microsoft and Myspace to gauge their views and interest.

It is the pure mention of a price that has caused the uproar but this has never been confirmed by any of the companies involved. They claim that media reports of the coined $5 are unsubstantiated but it is this that suggests a breach of the Sherman Antitrust Act - the law that bans price fixing of any sort. The actual price, high or low, is not an issue, just the fact that one might have been set is what breaks this law.

For free-market advocates, this goes against what they consider to be right. Surely, if it is a free market, then that means companies are free to fix their own prices? However, it is not difficult to see the logic behind the Sherman Antitrust Act.

If we go into a music shop and decide we don't like the price, we then have the freedom to shop elsewhere. The same applies to music downloads. Surely, if a price is set then the consumer has no option to shop around and is forced to pay a price that, once established, could continue to rise at an unstoppable rate?

The Sherman Antitrust Act is more about protecting the consumer from greedy commercialism acts than about protecting the business from customers who choose to shop according to their budget.
About the Author
Music expert Catherine Harvey looks at the alternatives to music shops and the legal wrangles that can ensue. To find out more please visit http://www.mbopmegastore.com/
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