Record companies refuse pounds 2 cut in CDs: MPs accuse music industry of operating cartels

THE PRICE of compact discs should come down by at least pounds 2, a parliamentary select committee reported yesterday. It also accused the music industry and the large record stores of operating a cartel to keep prices high.

But the heads of Britain's record companies made it clear that they had no intention of bringing prices down. Instead, they accused the National Heritage select committee chairman, Gerald Kaufman MP, of operating a 'kangaroo court', publicly accusing record companies of 'ripping off' consumers. They said he had produced a biased and prejudiced report.

The British Phonographic Industry, which represents the major record companies, has written to Tony Newton, Leader of the House of Commons, complaining about Mr Kaufman's handling of the committee.

Mr Kaufman responded yesterday by saying that the committee's remit was clear: 'It was looking for an answer to what seemed a very simple question. Why do compact discs cost quite a lot more in the United Kingdom than they do in the United States?' The report shows that CD prices here are the equivalent of pounds 2 more than they are in the US, and about pounds 2 more than the price of music cassettes here.

He hoped record companies would voluntarily reduce prices because such a move would be 'in their own interest'.

The report recognised that CDs were a better product but they cost almost the same to make as a cassette and the pounds 2.50 difference in price could not be justified. Retailers should put pressure on record companies and make price cuts themselves. 'It is now time for consumers to show they will no longer bear the prices currently charged for full-price compact discs,' it said.

The Office of Fair Trading is currently examining the music industry for a second time but a spokeswoman said yesterday that no decision had been reached on whether to refer it to the Monopolies and Mergers Commission.

The report says that four large record companies are responsible for almost all the mass-selling recordings. The retail market, also largely controlled by a few names, fails 'to use their clout to counter the power of the recording companies. While the committee found no evidence of formal or overt collusion, it considers that the major record companies and the retailers are effectively cartels, and indeed partly interlocking cartels'.

The committee urged the Department of Trade and Industy to re-examine legislation on copyright, particularly its anti-competitive effects in the recorded music industry.

But the central recommendation is a minimum price reduction of pounds 2 for CDs. It adds that 'the major retailers can, and should, play their own part in securing price reductions, both by exerting pressure on the major record companies and by making their own price reductions'.

Asked whether the companies would take action to cut prices, Maurice Oberstein, vice-president of the record company Polygram and chairman of the BPI, replied: 'There is nothing to act on.'

John Deacon, director-general of the BPI, said: 'There was never a likelihood that there would be a fair debate on the issues. A Monopolies and Mergers Commission reference or a change in the copyright law would not benefit UK consumers. On the contrary, it would definitely damage the hundreds of creative independent record producers and dealers.'

In its report the select committee also reinforced the widely made allegation that the top 40 music chart is rigged. It said that some record companies launched new artists by giving away copies of new singles to retailers who could then sell them for as little as 99p.

The report said: 'This practice is open to the serious charge that the top 40 chart is rigged by discriminatory pricing and distribution . . . the companies are prepared to forgo income on new issues to rig the chart by using independent retailers as trail-blazers in the hope of greater future profits.'

Leading article; letters, page 25