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AUS: ACCC Institutes Against Record Companies

The Australian Competition and Consumer Commission has instituted legal proceedings against Universal Music, Sony Music, Warner Music, the Australian Record Industry Association, and Music Industry Piracy Investigation Pty Ltd alleging that they have taken unlawful action in order to discourage or prevent Australian businesses from selling competitively priced "parallel imports"* of compact discs.

The ACCC began an investigation into the conduct of the major record companies after reports that they had threatened to withdraw significant trading benefits from retailers who stocked parallel imports. In several cases record companies had allegedly cut off supply to retailers who stocked parallel imports.

The ACCC alleges that by virtue of the action PolyGram, (which has since been taken over by Universal), Sony and Warner took to prevent retailers from stocking parallel imports they have:

breached section 47 of the Trade Practices Act 1974, which prohibits exclusive dealing; and breached section 46 of the Act by taking advantage of their market power to deter retailers from engaging in competitive conduct.

The ACCC also alleges that PolyGram, Sony and Warner each colluded with Asian record companies to try to prevent Asian wholesalers from supplying compact discs to Australian businesses. It is alleged that ARIA and MIPI assisted Sony Music to cut off these trading opportunities. These arrangements are alleged to be in breach of section 45 of the Act as having the purpose or likely effect of substantially lessening competition.

The ACCC is seeking penalties against the companies and seven senior executives, findings of fact, declarations, injunctions, and orders for each company to introduce a trade practices compliance program.

A directions hearing has been set down for 9.30 a.m. 13 September 1999 in the Federal Court, Sydney, before Justice Hill.

* Before 30 July 1998 Australian businesses were not permitted to buy recorded music (including compact discs) direct from foreign suppliers if copyright was licensed to someone else in Australia and they did not give permission to import. Most popular recorded music is licensed to the five 'majors' - the large multinational record companies in Australia including Universal, Sony and Warner. Changes to the Copyright Act 1968 now allow other businesses, apart from the international recording companies, to import, wholesale and distribute recorded music that has been released overseas. These recordings are known as 'parallel imports'. Parallel imports are different from 'pirates' because the licence fees on parallel imports, including artists' royalties, have already been paid in the country in which they are manufactured.

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