A major volley in record retailers’ fight for the right to sell used compact discs was fired Monday as a major West Coast chain filed suit against the country’s four largest record distribution arms.
Torrance-based Wherehouse Entertainment Inc. filed suit Monday in U.S. District Court in Los Angeles against Sony Music Distribution (Columbia, Epic and associated labels), CEMA (Capitol, EMI, Liberty, Angel, Blue Note, etc.), UNI (MCA, Geffen, GRP, etc.) and WEA (Warner Bros., Elektra, Atlantic, Rhino, etc.). Each of those companies recently initiated the policy of withholding cooperative advertising support from retailers who sell used CDs.
Wherehouse operates 339 retail outlets in 10 states, concentrated in the West; 270 of those outlets currently buy used compact discs from customers for resale.
The Wherehouse complaint asserts that the policy unfairly discriminates against Wherehouse Entertainment and other retailers who sell used CDs. The suit also charges that the distributors’ policies are an attempt to restrict the availability of used CDs in order to maintain the high prices manufacturers charge for new product.
“One of our motivations is that we don’t see the prices of new CDs coming down,” Wherehouse marketing communications VP Bruce Jesse told Daily Variety late Monday. Though the CD version of new product typically sells for several dollars more than its cassette counterpart, manufacturing costs on large orders of cassettes and CDs are essentially identical, and though compact discs are no longer shipped in cardboard “longboxes,” there has been no reflection, in wholesale or retail pricing, of the reduced cost.
So far, other retail chains are watching Wherehouse’s actions, said Jesse, which is one reason that the current lawsuit specifies no amount of damages. “The damages increase every day that the distributors hand advertising money to our competitors,” he explained. Co-op advertising is, he added, “a commonly accepted practice among all retailers, and our position is that they can’t segregate us just because we try to serve our customers (by buying and selling used CDs).”
Regarding country music star Garth Brooks’ recent statement that he will not allow his upcoming Liberty Records album to be sold by stores that deal used CDs , Jesse noted puckishly, “We know that we sell an awful lot of Garth Brooks albums, and it will be unfortunate if his fans are disappointed because they can’t find Garth’s new album in our stores.”
Representatives of Sony Music and WEA Distribution were unavailable and spokesmen for UNI and CEMA declined comment.