Tuesday, August 12, 2003

Antitrust News:Indie Music Retailers Sue Best Buy

This report in from Ed Christman at Billboard:

A group of independent music retailers has filed a class-action lawsuit against Best Buy Co. Inc., alleging that the chain violates U.S. antitrust laws, as well as California state laws, that govern loss-leader selling, the strategy of pricing product below cost.

In the lawsuit -- filed Aug. 6 in U.S. District Court for the Central District of California, Western Division -- the plaintiffs charge that Best Buy uses its clout to receive benefits from the major labels that are not generally available to the chain's competitors. The plaintiffs in the case are Mad Rhino, Boo Boo Records, Lou's Records, Dimple Records and Rand Foster of Fingerprints.

The lawsuit says Best Buy is "able to extract from the major record companies an additional 10% discount vis-a-vis other purchasers" and receives advertising and other allowances not generally granted to other merchants. According to the complaint, these favorable prices, terms and conditions allow Best Buy to sell new albums as loss leaders, diverting massive amounts of business away from its competitors.

The complaint alleges that Best Buy has knowingly received favorable and discriminatory prices on new albums, a practice that violates the Robinson-Patman Act. Also, the complaint says that Best Buy's below-cost pricing is a way of injuring competitors or destroying competition, in violation of the California Business and Professions Code. California has a state law that merchants must price product at least 6% above cost.

The lawsuit asks for treble damages and legal fees.
But wouldn't Best Buy's purchasing leverage benefit consumers? Oh, I forget. Under antitrust, a business can be punished for selling too high, too low, or the same as others. I'm glad antitrust law is of sufficient breadth to cover all these instances.

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