For those of you who griped that now-defunct digital downloading platforms like MusicNet and PressPlay were too expensive — prices like these should be illegal! — the US Second Circuit Court of Appeals has taken a significant step towards validating your opinion.
A lot of this stuff is in pretty heady legalese, but here's what you should know about the issue.
When digital-downloads became the craze during the last decade, the major labels (Sony, EMI, Warner, and Universal) were expected to wield significant influence. Turns out, they became such big players that, between them, they accounted for about four-fifths of all the digital music sold in this country. Warner Music and EMI started the service known as "MusicNet," while Universal and Sony launhced "PressPlay" — both of which have now gone to Digital Music Service Heaven (or Hell, depending on your perspective).
Not long after these services debuted, savvy consumers began to notice that: A), the price tag on these downloads did not seem to accurately reflect the true worth of the products (although determining the "true worth" of music is obviously its own sticky wicket), and B), the wholesale prices charged by MusicNet and PressPlay (i.e., the amount the retailers had to pay the major labels on a song-by-song basis) were strikingly similar: about seventy cents a pop. When compared to the price-per-song charged by eMusic — which sold music owned by independent labels at a quarter per download (and had no DRM restrictions) — it began to look suspicious.
For those of you who are allergic court proceedings, don't freak out. The question is pretty simple: did MusicNet and PressPlay agree to set the wholesale price at an artificially high level? In other words, was the 70 cents-per-song rate the result of natural market forces (which is legal) or a conspiring between the aforementioned major labels (definitely not legal — at least according to section one of the Sherman Antitrust Act)? When this case was first heard in October 2008, the U.S. District Court in New York dismissed the plaintiffs? claim, holding that their allegations of an illegal price-fixing agreement was both "implausible" and "unreasonable," and, worse yet, "did not justify the inference of [an illegal agreement]." The bottom line: the District Court did not let the plaintiffs have their day in court.
However, there may indeed be a light at the end of the tunnel. After the District Court made its ruling, the plaintiffs appealed and the Second Circuit found that the plaintiffs? complaint contained enough of a factual basis that, if all the alleged facts are true (and that, of course, is crucial), an inference of illegal conduct could be made. To state it another way, if the plaintiffs here have submitted legit evidence, then, according to the court, ?[these] allegations, taken together, place [the defendants?] conduct "in a context that raises a suggestion of an [illegal] agreement, not merely parallel conduct that could just as well be independent action."? Thus, while the Second Circuit did not actually make a determination of guilt or innocence in this case, they did provide the plaintiffs with a much-needed mulligan.
While the ultimate outcome of this case lies somewhere in the future, at least this much can be said: the major labels will be going to court. Familiar stomping grounds, at least.