AGCM

The investigation ascertained that the parties above concerted on the prices to be charged to their retailers and put that concertation into effect by selling at prices which were coordinated. Such a concertation had the object and effect of restricting competition within the Italian market for recorded music.

In view of the seriousness and the length of the infringements, the Authority ordered the five record companies involved to pay an administrative fine amounting in total to 7.69 billion lire.

The relevant product market determined during the investigation included production and distribution of CDs, cassettes and vinyl records to wholesalers and retailers in Italy. This market is characterized by high barriers to entry and sales are estimated to amount to 780 billion lire in 1996. The market share held by the five majors accounts for about 80 per cent.

The Authority found strong evidence of a concerted practice, which could be identified with a restrictive agreement, also on the basis of the regular exchange of information between the parties involved. Such an exchange of information regarded the prices to be charged to dealers, the quantity and value of sales, the coordinated organization of promotions to consumers. Additionally, this regular exchange of information was aimed at coordinating majors' price strategies.

The Authority ascertained the existence of a high uniformity with respect to:

a) the level and structure of price charged to dealers both for CDs and cassettes;

b) the supply contract terms offered to trade.

In fact the five majors adopted a uniform price structure, by adding to the list prices other two items which were the transport and delivery costs and the TV-ticket. The level of these three components was the same. In the course of the investigation it emerged that over the period January 1996-January 1997 nearly 90 per cent of list prices applied by the majors to their dealers and regarding hit songs were fixed at 20,000 lire. Such a price was added by TV-ticket, whose average value was equal at 3,000 lire in the above period, and the transport and packaging costs, that amounted to 6 per cent of the net total sales including the TV-ticket.

The described uniform price structure is generally adopted by the majors and is not applied so systematically by record companies which are not organized in the FIMI. Indeed, these companies introduce the above price components either in alternative way, or at different levels, or for some segments of consumers.

In relation to the supply conditions, a sample survey conducted over the period January 1996-January 1997 showed the substantial uniformity of the average values of discounts applied to trade by each major, with variations up to 1 per cent max. for retailers, and up to 1.3 per cent for wholesalers. The same survey also highlighted the uniformity of both payment terms and percentage of unsold goods. This was reflected by the adjustment of the average selling prices imposed by the majors on trade.

On the basis of the above considerations, the Authority ruled that the five majors, also through FIMI, put a concerted practice into effect in such a way as to violate the Competition Act. Additionally, the Authority ordered the majors to pay an administrative fine amounting in total to 7.69 billion lire, equal to 1.5 per cent of the total sales of Warner Musica Italia, Polygram Italia, BMG Ricordi, Sony Music Entertainment, and to 1 per cent of the total sales of EMI Music Italy. Within 90 days of receiving notification, BMG Ricordi will have to pay 2.15 billion; EMI about 1 billion; Polygram 1.37 billion; Sony about 1.5 billion; Warner 1.64 billion.