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AOL Time Warner, Vivendi Charged With Price-Fixing 'Three Tenors'

31 Jul, 2001 By: Hive News

AOL Time Warner Inc. and Vivendi Universal SA recording units were charged by U.S. antitrust authorities with conspiring to fix prices on compact discs, tape cassettes and videotapes of the Three Tenors.

According to Bloomberg News, the companies illegally promoted the latest recording of Luciano Pavarotti, Jose Carreras and Placido Domingo by agreeing to a two-month discounting and advertising moratorium for earlier works by the opera stars, said the Federal Trade Commission. The distributors feared fans would neglect the newest offering if previous, and arguably superior, recordings were available more cheaply, the FTC said.

"Naked price-fixing agreements such as this are bad for consumers," said Joseph Simons, director of the FTC's Bureau of Competition. "This case is particularly troublesome because the companies involved here are large, sophisticated and should have known better."

The case is the latest effort by antitrust enforcers to protect consumers from recording-industry pricing practices. Last year, the five largest record companies, including Warner Communications, settled a case by agreeing not to require a minimum retail price for CDs for seven years.

The AOL Time Warner unit denied in today's case it behaved illegally and agreed not to engage in any price fixing, Bloomberg said. Warner "made a business decision to resolve this matter amicably rather than engage in protracted, adversarial proceedings with the FTC," said a spokeswoman, Dawn Bridges.

"This action will serve, or we hope it will serve, as a deterrent for future joint ventures for this business in particular," Simons said. He said the law doesn't provide for any penalties. There will be many similar joint ventures in the music industry, he said.

Vivendi's Universal Music Group is ``very disappointed that the FTC is pursuing this issue,'' said Bob Bernstein, a spokesman. ``We disagree that any unlawful activities occurred and we intend to defend our position'' before a judge.

The FTC said the companies broke the law when they agreed not to discount or advertise the 1990 and 1994 recordings of the Three Tenors for two months after the August 1998 release of that year's concert near the Eiffel Tower in Paris, Bloomberg reported.

The companies suppressed competition for the new album, fearing it would be ``neither as original nor as commercially appealing'' as the Three Tenors' earlier recordings, the FTC said in its complaint.

In 1997, Warner and PolyGram Music Group, a predecessor of Vivendi, teamed up to market the video and audio recordings of the Three Tenors concert on July 10, 1998. It was held in Paris, the site of the World Cup soccer finals. The earlier Three Tenors recordings had been made at concerts at World Cup finals.

Warner distributed the 1998 recording in the U.S. and PolyGram elsewhere. The original 1990 recording, The Three Tenors, became the best-selling classical music album. Their 1998 disc was panned by music critics.

The FTC voted to accept the settlement with Warner and to file the complaint against Vivendi.

The European Commission is investigating allegations that AOL Time Warner, Vivendi, and five other rivals conspired to keep the prices of movies on DVD artificially high.

Mario Monti, the European Union's competition commissioner, said last month that EU authorities had received a ``significant number'' of complaints that video makers were preventing the import into Europe of cheaper videos.

The seven companies, which also include Walt Disney Co., 20th Century Fox, MGM Inc., Sony Corp. and Paramount Pictures, face fines of as much as 10% of annual sales if the European Commission files a complaint.

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