price fixing

Case Study Five large music companies and three large music retailers agreed in October 2006 to settle a lawsuit over alleged price fixing during the late 1990s. The companies did not admit wrongdoing, but agreed to refrain from using minimum-advertised pricing, the practice of establishing minimum retail prices that served as the basis for the lawsuit. The defendants claimed minimum-advertised pricing was actually procompetitive because it helped protect independent music retailers from cutthroat competition by big discounters such as Wal-Mart. As a result, they claimed, the practice increased the number of retailers. The agreement required the defendants to pay $67 million and to distribute $75 million in compact disks to public and nonprofit groups. A government official indicated that halting the retail pricing plan could cause prices to drop by as much as $5 per CD.