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Judge Tells Vivendi Not To Fix Audio, Video Prices

1 Jul, 2002 By: Hive News


An administrative law judge's ruling in a case surrounding distribution of Three Tenors Media has warned the distributing labels not to "fix, raise or stabilize" prices or limit advertising for audio or video products.

Judge James P. Timony ordered a handful of Vivendi Universal S.A. subsidiaries to cease and desist from entering into "any combination, conspiracy, or agreement" with producers or sellers at wholesale of audio or video products to "fix, raise, or stabilize prices or price levels" in connection with the sale in or into the United States of any audio or video product.

In addition, under the terms of the order, the respondents, which include PolyGram Holding, Inc.; Decca Music Group Limited; UMG Recordings, Inc.; and Universal Music & Video Distribution Corp., are barred from entering into agreements that prohibit, restrict, regulate or otherwise place any limitation on "any truthful, nondeceptive advertising or promotion in the United States" for any audio or video product.

The judge's order wraps up administrative proceedings conducted to address allegations that they entered into an agreement with Warner Communications, Inc. to fix prices and limit advertising for a certain period of time for the first two of three CD and video products developed from a series of concerts by The Three Tenors : Luciano Pavarotti, Placido Domingo, and Jose Carreras.

The Federal Trade Commission (FTC)'s complaint alleged the agreement, while made in association with an otherwise legal joint venture between the companies, violated Section 5 of the FTC Act by illegally reducing competition in the U.S. market for the Three Tenors audio and video products. The judge's initial decision is subject to review by the full Commission on its own motion, or at the request of either party. The parties have 30 days to appeal.

PolyGram Music Group (PolyGram) originally comprised PolyGram Holding, Inc.; Decca Records (predecessor to Decca Music); PolyGram Records, and PolyGram Distribution. In December 1998, PolyGram was acquired by Seagram Company, Ltd., a Canadian corporation, which two years later merged with Vivendi S.A. and Canal Plus S.A. to form Vivendi. PolyGram Records was the predecessor to UMG Recordings, Inc. (UMG), and PolyGram Distribution was the predecessor to Universal Music & Video Distribution Corp. (UMVD).

According to the FTC complaint, the agreement between Warner, which settled the charges a year ago, and PolyGram involved audio and video products featuring The Three Tenors. Beginning in 1990, The Tenors have come together every four years at the site of the World Cup soccer finals for a combination live concert and recording session. The complaint stated that prior to each performance the concert promoter selects one (or more) of the major music/video distribution companies to distribute compact discs, cassettes, videocassettes and videodiscs made from the master recordings.

PolyGram acquired distribution rights to the original 1990 Three Tenors performance titled "The Three Tenors," wihle Warner acquired distribution rights to the followup performance, "The Three Tenors in Concert 1994."

In 1997, the complaint alleged, Warner and PolyGram agreed to collaborate to distribute the audio and video products derived from the next Three Tenors World Cup concert, scheduled for Paris on July 10, 1998. The complaint alleged that the companies agreed that Warner would distribute the 1998 release in the United States; PolyGram would distribute the 1998 release outside of the United States; and the firms would share all costs, profits, and losses equally. The complaint did not challenge the basic structure of the Warner/PolyGram joint venture.

As the concert approached, the complaint alleged, Warner and PolyGram worried that the audio and video products resulting from the Paris concert would not be as original or as commercially appealing as the earlier Three Tenors releases and imposed a moratorium from Aug. 1 through Oct. 15, 1998, to reduce competition from the earlier releases.

Under the agreement, the complaint alleged, PolyGram would not discount or advertise the 1990 Three Tenors album and video during the moratorium period; in return, Warner would not discount or advertise the 1994 Three Tenors album and video during the same interval.

The third Three Tenors album and video, both titled "The Three Tenors - Paris 1998," were released Aug. 18, 1998, and distributed in the United States by Warner.

the effect of the moratorium agreement, the complaint alleged, was to restrain competition unreasonably, to increase prices, and injure consumers.

In addition to prohibiting such agreements, Timony's order specifically defines the types of agreements that would not be in violation of its terms. These include: 1) a written agreement to set the price (or price levels) for any audio or video product when such an agreement is "reasonably related" to a lawful joint venture agreement and "reasonably necessary" to achieve its pro-competitive benefits; and 2) a written agreement that regulates or restricts the advertising or promotion of any audio or video product when such an agreement is "reasonably related" to a lawful joint venture agreement and "reasonably necessary" to achieve its pro-competitive benefits.

In addition, it would not be a violation for a respondent and a seller (any other wholesaler) to "enter into, attempt to enter into, or comply with a written agreement to set the prices or price levels" of any jointly produced audio or video product or to agree to restrict the advertising or promotion of such a jointly produced product. Further, the companies would not violate the order by agreeing “to prevent or discourage the advertising, marketing, promotion, or sale to children of audio or video products labeled or rated with a parental advisory or cautionary statement.”

The decision was entered June 20 and released Friday.

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