971 0070
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
- COMMISSIONERS:
- Robert Pitofsky, Chairman
- Sheila F. Anthony
- Mozelle W. Thompson
- Orson Swindle
- Thomas B. Leary
In the Matter of
Sony Music Entertainment, Inc.
Docket No. C-3971
DECISION AND ORDER
The Federal Trade Commission having initiated an investigation of certain acts and
practices of Respondent, Sony Music Entertainment Inc., and Respondent having been
furnished thereafter with a copy of the draft of Complaint that the Bureau of Competition
presented to the Commission for its consideration and which, if issued, would charge
Respondent with violations of Section 5 of the Federal Trade Commission Act, as amended,
15 U.S.C. § 45; and
Respondent, its attorneys, and counsel for the Commission having thereafter executed an
Agreement Containing Consent Order ("Consent Agreement"), containing an
admission by Respondent of all the jurisdictional facts set forth in the aforesaid draft
of Complaint, a statement that the signing of said Consent Agreement is for settlement
purposes only and does not constitute an admission by Respondent that the law has been
violated as alleged in such Complaint, or that the facts as alleged in such Complaint,
other than jurisdictional facts, are true, and waivers and other provisions as required by
the Commission's Rules; and
The Commission having thereafter considered the matter and having determined that it
had reason to believe that Respondent has violated said Act, and that a Complaint should
issue stating its charges in that respect, and having accepted the executed Consent
Agreement and placed such Consent Agreement on the public record for a period of thirty
(30) days for the receipt and consideration of public comments, and having duly considered
the comments filed thereafter by interested persons pursuant to § 2.34 of its Rules,
the Commission hereby issues its complaint, makes the following jurisdictional findings
and issues the following Order:
- 1. Respondent Sony Music Entertainment Inc. is a corporation organized and existing
under the laws of the State of Delaware with its principal place of business at 550
Madison Avenue, New York, New York.
- 2. The Federal Trade Commission has jurisdiction of the subject matter of this
proceeding and of the Respondent, and the proceeding is in the public interest.
ORDER
I.
It is ordered that, as used in this Order, the following definitions
shall apply:
- A. "Sony" or "Respondent" means Sony Music Entertainment Inc., its
directors, officers, employees, agents, representatives, predecessors, successors, and
assigns; its subsidiaries, divisions, groups, and affiliates controlled by Sony, and the
respective directors, officers, employees, agents, representatives, successors, and
assigns of each.
- B. "Commission" means the Federal Trade Commission.
- C. "Record Clubs" means the divisions of The Columbia House Company and BMG
Music Service that operate as club-based direct marketers of prerecorded music, and
manufacture or have manufactured for them product pursuant to a club license.
- D. "Product" means prerecorded music in physical or electronic format that is
offered for sale or sold in the United States, including, but not limited to, compact
discs ("CDs"), audio DVDs, audio cassettes, albums and digital audio files (i.e.,
digital files which are delivered to the consumer electronically, to be stored on the
consumer's hard drive or other storage device). "Product" does not include
prerecorded music in physical or other electronic format manufactured or distributed by or
for Record Clubs pursuant to Record Club licenses.
- E. "Dealer" means any person, corporation, or entity that in the course of its
business offers for sale or sells any Product in or into the United States, including, but
not limited to, wholesale distributors, retail establishments, and Internet retail sites,
but excluding Record Producers.
- F. "Record Producer" means any person, corporation or entity that in the
course of its business produces sound recordings for recording artists and manufactures
Product from such sound recordings.
- G. "Cooperative Advertising or Other Promotional Funds" means any payment, rebate, charge-back or other consideration
provided to a Dealer by Sony in exchange for any type of advertising, promotion or
marketing efforts by that Dealer on behalf of Sony. This term also includes advertising,
promotion, or marketing efforts by Sony on behalf of one or more identified Dealers.
Examples of cooperative advertising include, but are not limited to, free goods provided
to a Dealer by Sony, and payments for newspaper advertisements, radio and television
advertisements, internet banner advertisements, posters and signs within a Dealer's retail
stores, pricing or positioning of Products within a Dealer's retail stores, and
point-of-purchase merchandising.
- H. "Media Advertising" means any promotional
effort by a Dealer outside of the Dealer's physical location or Dealer-controlled internet
site, including but not limited to, print, radio, billboards, or television.
- I. "In-Store Promotion" means any promotional
effort conducted in or on the physical premises of a Dealer or a Dealer-controlled
internet site, including but not limited to, signs, bin cards, end caps, hit walls,
listening posts, internet banner advertisements, and promotional stickers.
- J. "Advertised or Promoted" means:
- (1) any form of advertising, promotion, or marketing
efforts by Sony on behalf of one or more of its Dealers;
- (2) any form of Media Advertising efforts including, but
not limited to, print, radio, billboard, or television; and
- (3) any form of In-Store Promotion efforts including, but
not limited to, signs, bin cards, end caps, hit walls, listening posts, internet banner
advertisements and promotional stickers.
II.
It is further ordered that for a period
of seven (7) years, Sony, directly, indirectly, or through any corporation, subsidiary,
division or other device, in connection with the offering for sale, sale or distribution
of any Sony Product in or into the United States of America in or affecting
"commerce," as defined by the Federal Trade Commission Act, shall cease and
desist from directly or indirectly adopting, maintaining, enforcing or threatening to
enforce any policy, practice or plan which makes the receipt of any Cooperative
Advertising or Other Promotional Funds contingent upon the price or price level at which
any Sony Product is Advertised or Promoted.
III.
It is further ordered that Sony,
directly, indirectly, or through any corporation, subsidiary, division or other device, in
connection with the offering for sale, sale or distribution of any Sony Product in or into
the United States of America in or affecting "commerce," as defined by the
Federal Trade Commission Act, shall not directly or indirectly:
- A. Adopt, maintain, enforce or threaten to enforce any
policy, practice or plan which makes the receipt of any Cooperative Advertising or Other
Promotional Funds contingent upon the price at which any Sony Product is offered for sale
or sold;
- B. Adopt, maintain, enforce or threaten to enforce any
policy, practice or plan which makes the receipt of any Cooperative Advertising or Other
Promotional Funds contingent upon the price or price level of the Sony Product in any
In-Store Promotion or Media Advertising where the Dealer does not seek any contribution
from Sony for the cost of said Media Advertising or In-Store Promotion;
- C. Adopt, maintain, enforce or threaten to enforce any
policy, practice or plan which makes the receipt of any Cooperative Advertising or Other
Promotional Funds contingent upon the price or price level of the Sony Product in any
In-Store Promotion or Media Advertising if Sony's contribution exceeds 100% of the
Dealer's actual costs of said Media Advertising or In-Store Promotion;
- D. Agree with any Dealer to control or maintain the resale
price at which the Dealer may offer for sale or sell any Sony Product;
- E. For a period of five (5) years, announce resale or
minimum advertised prices of Sony Product and unilaterally terminate those who fail to
comply because of such failure. Notwithstanding the foregoing, nothing herein shall
prohibit Sony from announcing suggested list prices for Sony Product.
IV.
Nothing herein shall prohibit Sony from providing
Cooperative Advertising or Other Promotional Funds on the condition that such funds are
passed through in whole or in part to the consumer (hereinafter "Pass-Through
Funds"). Sony shall maintain records that specifically identify by title or
collection of titles the amount of Pass-Through Funds provided to each Dealer and the date
said amount was provided. Whenever Sony provides Pass-Through Funds to a Dealer, Sony
shall specifically notify the Dealer in writing either that these funds are intended to be
passed through to the ultimate consumer in whole, or that the Dealer may determine what
portion of the funds are to be passed through, provided that some portion of the funds
must be passed through to the ultimate consumer. The documents described in this Paragraph
VI shall be provided to the Commission upon request.
V.
It is further ordered that for a period
of seven (7) years:
- A. Sony shall amend all policy manuals applicable to the
distribution of Sony Product to state affirmatively that Sony does not maintain or enforce
any plan, practice or policy of the type prohibited in Paragraph II of this Order, and not
otherwise permitted by Paragraph IV of this Order.
- B. In each published full catalogue or published full price
list in which Sony states suggested list prices or codes indicative of such prices, Sony
shall state affirmatively that it does not maintain or enforce any plan, practice or
policy of the type prohibited in Paragraph II of this Order, and not otherwise permitted
by Paragraph IV of this Order.
The documents described in this Paragraph V shall be
provided to the Commission upon request.
VI.
It is further ordered that, within 10
days after this Order becomes final, Sony shall mail by first class mail a letter
containing the language attached as Exhibit A to:
- A. All of its directors, officers, distributors, agents and
sales representatives in the United States, and
- B. All Dealers to which Sony sells directly and that are
engaged in the sale of any Sony Product in or into the United States of America.
VII.
It is further ordered that for a period
of seven (7) years Sony shall mail by first class mail a letter containing the language
attached as Exhibit A to:
- A. Each new director, officer, distributor, agent, and
sales representative of Sony in the United States, and
- B. Each new Dealer to which Sony sells directly which is
engaged in the sale of any Sony Product in or into the United States of America, within
thirty (30) days of the commencement of such person's employment or affiliation with Sony.
VIII.
It is further ordered, that annually for
five (5) years on the anniversary of the date this Order becomes final, and at such other
times as the Commission may by written notice to Sony require, Sony shall file with the
Commission a verified written report setting forth in detail the manner and form in which
Sony has complied and is complying with this Order.
IX.
It is further ordered, that this Order
shall terminate on August 30, 2020.
By the Commission.
Donald S. Clark
Secretary
ISSUED: August 30, 2000
EXHIBIT A
[COMPANY LETTERHEAD]
Dear [Recipient]:
Sony announces several important changes in policy. All of
these changes will be reflected in the new Policy Manual.
Sony has dropped its Minimum Advertised Price
("MAP") policy effective _________. Cooperative advertising and other
promotional funds will not be conditioned upon the price at which Sony product is
advertised or promoted. As many of you know, the Federal Trade Commission has conducted an
investigation into Sony's MAP policies. To end the investigation expeditiously and to
avoid disruption to the conduct of its business, Sony has voluntarily agreed, without
admitting any violation of the law, to the entry of a Consent Agreement relating to MAP
and other related matters.
Sony's customers can advertise and promote our products at
any price they choose. Sony will not withhold cooperative advertising or other promotional
funds on the basis of the price at which Sony product is advertised in the media or
promoted in your stores. Sony may announce suggested retail prices, but retailers remain
free to sell and advertise Sony product at any price they choose.
Concurrence:
__________________________
William L. Lanning, Esq.
Federal Trade Commission
Bureau of Competition |