Suit Could Reap Refunds on CDs for Consumers

If a massive class-action lawsuit against the music industry is successful, millions of CD consumers stand to get a little extra cash — up to $20 per person.

That’s because lawyers arguing for the $143 million settlement say that record labels pressured retailers to engage in price fixing from 1995 to 2000, which translated to higher costs for consumers.

The high cost of CDs has long been a point of contention with music fans. Now, the class-action suit may be a way for consumers to get some of that money back and send a message to the flailing music industry.

"Over time, it does represent a tremendous amount of money taken from consumers, and we believe that’s not justified," said Joseph C. Kohn, a Philadelphia lawyer for the plaintiffs.

The suit states that record labels threatened to withhold money they usually give retailers for advertising and promotions if the stores charged too little for CDs. Therefore, retailers that didn't comply with the so-called "minimum advertised price" (MAP) programs stood to lose millions.

"Our contention is that it made it difficult or impossible to sell at lower prices," said Kohn, a partner at Kohn, Swift & Graf, P.C., lead counsel on the case. "We claim that the MAP program was an illegal attempt to fix prices."

The defendants, which include Universal Music Group, Sony Music, BMG, EMI and Warner Music, deny fixing any prices. However, the companies have agreed to the proposed settlement of $67 million in cash for claimants and $75 million in free CDs.

Attorneys for the retailer and distributor defendants did not return calls seeking comment.

If the settlement goes through, anyone in the U.S. who bought a CD between Jan. 1, 1995, and Dec. 22, 2000, could get a refund.

Consumers can apply online at No receipts of purchase are necessary. The deadline to register is March 3.

To date, 2 million people have applied to be part of the class, according to Kohn — around the number needed for each person to get $20 back.

But music fans may not want to tell all their friends about the suit just yet. If too many people sign up, and the amount per person dips below $5, Kohn said, it wouldn’t be economical to print and mail all the checks. Instead, the money would go to non-profit organizations supporting music programs.

CD buyers who haven’t yet signed on are mixed about whether they’ll participate or not.

Philadelphia student and music buff Dave Ebersole, 23, said he’s definitely planning to apply for the rebate.

"I’m very anti-corporate record company — I don’t trust them," Ebersole said. "They don’t care about music; they just want to make money. We have the power as consumers to change that. This is a good thing."

But Los Angeles financial advisor Steve Buxbaum, 34, said he doesn’t buy many CDs and isn’t going to bother applying for money back. He questions whether a class-action suit will have an impact.

"I don’t think it’s a particularly effective way of instituting constructive change in an industry," he said. "As a general rule, lawsuits like this are a load of crap."

Sixty law firms and attorneys general from 43 states are involved in bringing the class action, and will get 10 percent of the total settlement. Consumers from all 50 states are eligible to participate.

The hearing to determine whether the $143 million settlement is approved is slated for May 22, 2003.

Kohn hopes to send a message to corporate America with this consumer class-action suit, which is one of the largest national cash distributions the country has seen.

"It’s important to let businesses know that these kinds of activities can be looked into and money can go back to consumers at the end of the day," he said.