OFT CD investigation still not closed but majors are not ‘collectively dominant’

The OFT’s announcement that it has concluded its lengthy investigation into the blocking of parallel importing of CDs from other European countries is not quite as comforting for the record companies as immediate Press reports suggested. In its Report (the fruit of over two years’ work set in train by Mr Stephen Byers ‘rip-off Britain’ initiative), the OFT says that it would welcome receiving any evidence that any record companies are party to agreements with retailers that block imports of cheaper foreign-sourced product. So the record companies are not completely off the hook.

However the OFT wisely decided that the practice of offering bonus tracks on UK releases was not anti-competitive – except potentially in relation to compilation albums. So record companies are likely to carry on with this practice. The OFT Report will be read carefully by the record companies as changes in the law envisaged in the Enterprise Bill will make investigation easier in future – and unless the UK joins the Euro, currency fluctuations (and the inevitable commercial response to them) are sure to prompt further investigation.

What is certainly the most striking part of the Report (and which is bound to be regarded as its ‘silver lining’) is the finding by the OFT that the majors do not enjoy a ‘collectively dominant’ position. This is the first such specific finding by a competition authority since the Airtours case in the European Court tightened up the definition of the whole concept. It will be recalled that it was the existence of ‘collective dominance’ in the music industry (in the view of the EC Commission) that put paid to the attempts of EMI to merge with Time-Warner and then BMG. Recently the EC Commission passed up the opportunity to comment on the concept of ‘collective dominance’ in the music industry post Airtours in clearing the acquisition of Zomba by BMG. This regulatory straw in the wind in a Report where the crippling effect of piracy on any supposed market power enjoyed by the majors was not even mentioned (let alone discussed) supports Time Warner’s recently expressed optimism that 5 into 4 will one day be allowed to go.

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