Music Indies Sue Best Buy18 Aug, 2003 By: Holly J. Wagner
A group of independent music retailers has sued Best Buy, alleging the retailer is trying to drive them out of business with loss leaders by getting preferential pricing on CDs from the major music companies.
The lawsuit, filed in U.S. District Court in Los Angeles, alleges that “Best Buy has been able to extract from the major record companies an additional 10 percent discount vis-?-vis other purchasers” in the form of a “slotting allowance” and advertising and promotional funds that are not available to other retailers.
That amounts to discriminatory pricing and advertising and promotional allowances under the Robinson-Patman Act, the complaint alleges.
The case also alleges that Best Buy is violating a California state law that requires merchants to price goods at least 6 percent above cost, offering loss-leader pricing in the first week of release, with which smaller retailers are unable to compete.
Plaintiffs' attorney Maxwell Blecher said based on some advertised sale prices, the only way the chain could be selling certain titles at 6 percent above cost is if it is getting a better price than the independents.
“One way or the other, they are going to be guilty of something,” he said. “If they pay the same price as everybody else, $9.98 isn't going to get it because my guys are getting it for $12.02.”
Best Buy spokeswoman Dawn Bryant declined comment, citing a policy against commenting on pending litigation.
Plaintiffs in the case are indie music retailers Mad Rhino, Claremont, Calif.; Boo Boo Records, San Luis Obispo, Calif.; Lou's Records, Encinitas, Calif.; Dimple Records, Sacramento, Calif.; and Fingerprints, Long Beach, Calif.
Blecher will seek to have the complaint certified as a class action representing all the state's independent CD retailers that are in the same situation. The complaint seeks treble damages and a court order barring Best Buy from getting preferential pricing on CDs or selling CDs for less than 6 percent above cost.
Declining music sales over the last few years have ravaged the music industry. The Recording Industry Association of America (RIAA) faults illegal trading in copyrighted music files that began with Napster and still takes place on the Internet. Independents have been hit the hardest, because they are unable to make up the losses in other areas of business.