WRITTEN QUESTION E-2232/02

by Charles Tannock (PPE-DE) to the Commission

(23 July 2002)

Subject: CD prices in Europe

Last year, Commissioner Monti announced that he would be investigating the price of CDs in Europe. What are the findings of that study? Can the Commission explain the much higher prices charged for the same product or essentially the same product, in the European Union compared to the United States or the divergences within the European Union itself? Does the Commission believe that the higher prices charged in Europe result principally from the higher wholesale prices charged by the music industry or to higher mark-ups by retailers, and does the Commission believe that these price differences can be justified on the grounds of differences in rental and transport costs? At all events, does the Commission believe that there has been any breach of European Competition Law?

Finally, are there any restrictions on retailers who wish to purchase CDs in the United States, ship them to Europe and sell them at prices similar to those at which they are sold in the United States?

Answer given by Mr Monti on behalf of the Commission

(30 September 2002)

In January 2001 the Commission opened five separate investigations into the vertical relationships between the five major record companies and their retailers. The investigation focussed on allegations of retail price maintenance by the majors through the use of contracts with retailers where co-operative advertising arrangements were linked to minimum advertised prices. The Commission's investigation found that three of the majors were including minimum advertised prices in certain of their co-operative advertising agreements in Germany. These companies have subsequently ended these activities.

The five music companies involved in these cases were: Bertelsmann Music Group, EMI, Sony Music, Universal Music and Warner Music.

As the possible infringements were confined to the territory of single Member States, and in line with the Commission's policy of decentralising the enforcement of competition law in appropriate cases, the Commission has informed the relevant national competition authorities of the results of its inquiry. It was accordingly within the national authorities' discretion to determine whether or not further investigation or action at the national level was appropriate.

The Commission suspended its inquiry in August 2001. More information on the outcome of the Commission's inquiry can be found in the press release IP/01/1212 issued on 20 August 2001 at:

http://europa.eu.int/rapid/start/cgi/guesten.ksh?p_action.gettxt=gt&doc=IP/01/1212|0|AGED&lg=EN&display=.

The question, as to whether Union/European Economic Area (EU/EEA) retailers can import CDs from the United States, raises copyright issues. Indeed, the Community Legislator harmonised the distribution right of performers, phonogram producers, film producers and broadcasters via Article 9 of Directive 92/100/EEC of 19 November 1992, on rental right and lending right and on certain rights related to copyright in the field of intellectual property(1). Consequently, these rightholders have the exclusive right to make available the protected objects (CDs in the present case), including copies thereof, to the public. The distribution right is subject to Community exhaustion: it is only exhausted within the EEA in respect of an object where the first sale of that object is made by the rightholder or with his consent in the EEA. This restriction applies to retailers who purchase CDs in the United States and want to distribute them in the EEA.

However, given the high degree of concentration in the industry, the Commission indicated in its press release of August 2001, that it will continue to keep the music industry under close scrutiny: the Commission may re-open its inquiries if additional information comes to light in relation to this or similar practices.

(1) OJ L 346, 27.11.1992.