EMI, Music Labels Rejected by High Court in Appeal of Song-Pricing Lawsuit

The U.S. Supreme Court rejected an appeal from the country’s four largest music labels, refusing to block a suit accusing them of conspiring to fix Internet song prices.

Units of Sony Corp., Vivendi SA, Warner Music Group Corp. and EMI Group Ltd. argued unsuccessfully that the allegations in the consumer complaint aren’t sufficient to suggest the companies engaged in misconduct. A federal appeals court in New York said the allegations were enough for the case to go forward, and the Supreme Court today left that ruling intact.

The suit centers on MusicNet and pressplay, two services the music companies started in 2001 to sell songs online. The complaint alleges the services charged unreasonably high rates - - a combined $240 per year in subscription fees -- and imposed unwarranted restrictions, barring customers from transferring songs to iPods and other portable digital music players.

The consumers also contend that when the labels later began selling digital songs through other services, they acted in concert to set a price floor of 70 cents per song.

The Supreme Court imposed new requirements on plaintiffs in a 2007 ruling that threw out an antitrust lawsuit against telephone companies including Verizon Communications Inc. The 7- 2 majority said the complaint in the case made only a general allegation about an illegal agreement among competitors and lacked the specificity required under federal law.

The high court reinforced that decision two years later in a case outside the antitrust context, ruling 5-4 against a Pakistani man seeking to sue top government officials for allegedly having him arrested, beaten and held in solitary confinement after the Sept. 11 attacks.

In ruling that the music case could proceed to the evidence-gathering stage, the 2nd U.S. Circuit Court of Appeals said the complaint was more detailed than the one rejected by the Supreme Court in the telephone case.

“The complaint alleges specific facts sufficient to plausibly suggest that the parallel conduct alleged was the result of an agreement among the defendants,” the panel said.

The case is Sony Music v. Starr, 10-263.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.

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