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
Time Warner, Inc.
Docket No. C-3972
DECISION AND ORDER
The Federal Trade Commission having initiated an investigation of certain acts and
practices of Respondent, Time Warner 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:
- Respondent Time Warner Inc. is a corporation organized and existing under the laws of
the State of Delaware with its principal place of business at 75 Rockefeller Plaza, New
York, New York. Warner Music Group Inc. is a wholly owned subsidiary of Time Warner Inc.,
and is a corporation organized and existing under the laws of the State of Delaware with
its principal place of business at 75 Rockefeller Plaza, New York, New York.
Warner-Elektra-Atlantic Corporation is a wholly owned subsidiary of Time Warner, and is a
corporation organized and existing under the laws of the State of New York with its
principal place of business at 111 N. Hollywood Way, Burbank, California.
- 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:
- "Time Warner" or "Respondent" means Time Warner Inc., its directors,
officers, employees, agents, representatives, predecessors, successors, and assigns; its
subsidiaries, divisions, groups, and affiliates controlled by Time Warner, and the
respective directors, officers, employees, agents, representatives, successors, and
assigns of each.
- "WMG" means Warner Music Group Inc., its directors, officers, employees,
agents, representatives, predecessors, successors, and assigns; its subsidiaries,
divisions, groups, and affiliates controlled by WMG, and the respective directors,
officers, employees, agents, representatives, successors, and assigns of each.
- "WEA" means Warner-Elektra-Atlantic Corporation, its directors, officers,
employees, agents, representatives, predecessors, successors, and assigns; its
subsidiaries, divisions, groups, and affiliates controlled by WEA, and the respective
directors, officers, employees, agents, representatives, successors, and assigns of each.
- "Commission" means the Federal Trade Commission.
- "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.
- "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.
- "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.
- "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.
- "Cooperative Advertising or Other Promotional Funds" means any payment,
rebate, charge-back or other consideration provided to a Dealer by WMG in exchange for any
type of advertising, promotion or marketing efforts by that Dealer on behalf of WMG. This
term also includes advertising, promotion, or marketing efforts by WMG 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 WMG, 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.
- "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.
- "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.
- "Advertised or Promoted" means:
- (1) any form of advertising, promotion, or marketing efforts by WMG 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, WMG,
directly, indirectly, or through any corporation, subsidiary, division or other device, in
connection with the offering for sale, sale or distribution of any WMG 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 WMG Product is Advertised or Promoted.
III.
It is further ordered that WMG, directly, indirectly, or through any
corporation, subsidiary, division or other device, in connection with the offering for
sale, sale or distribution of any WMG 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:
- 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 WMG Product is offered for sale or sold;
- 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 WMG Product in any In-Store Promotion or Media Advertising
where the Dealer does not seek any contribution from WMG for the cost of said Media
Advertising or In-Store Promotion;
- 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 WMG Product in any In-Store Promotion or Media Advertising if
WMG's contribution exceeds 100% of the Dealer's actual costs of said Media Advertising or
In-Store Promotion;
- Agree with any Dealer to control or maintain the resale price at which the Dealer may
offer for sale or sell any WMG Product;
- For a period of five (5) years, announce resale or minimum advertised prices of WMG
Product and unilaterally terminate those who fail to comply because of such failure.
Notwithstanding the foregoing, nothing herein shall prohibit WMG from announcing suggested
list prices for WMG Product.
IV.
Nothing herein shall prohibit WMG 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"). WMG 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 WMG provides
Pass-Through Funds to a Dealer, WMG 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 IV shall be provided to the Commission upon request.
V.
It is further ordered that for a period of seven (7) years:
- WMG shall amend all policy manuals applicable to the distribution of WMG Product to
state affirmatively that WMG 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.
- In each published full catalogue or published full price list in which WMG states
suggested list prices or codes indicative of such prices, WMG 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, WMG shall mail by first class mail a letter containing the language attached as
Exhibit A to:
- All of its directors, officers, distributors, agents and sales representatives in the
United States, and
- All Dealers to which WEA sells directly and that are engaged in the sale of any WMG
Product in or into the United States of America.
VII.
It is further ordered that for a period of seven (7) years WMG shall
mail by first class mail a letter containing the language attached as Exhibit A to:
- Each new director, officer, distributor, agent, and sales representative of WMG in the
United States, and
- Each new Dealer to which WEA sells directly which is engaged in the sale of any WMG
Product in or into the United States of America,
- within thirty (30) days of the commencement of such person's employment or affiliation
with WMG or WEA.
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 Time Warner require, Time Warner shall file with the
Commission a verified written report setting forth in detail the manner and form in which
Time Warner 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]:
WEA announces several important changes in policy. All of these changes will be
reflected in the new Policy Manual.
WEA has dropped its Minimum Advertised Price ("MAP") policy effective
_________. Cooperative advertising and other promotional funds will not be conditioned
upon the price at which WMG product is advertised or promoted. As many of you know, the
Federal Trade Commission has conducted an investigation into WEA's MAP policies. To end
the investigation expeditiously and to avoid disruption to the conduct of its business,
WEA has voluntarily agreed, without admitting any violation of the law, to the entry of a
Consent Agreement relating to MAP and other related matters.
WEA's customers can advertise and promote our products at any price they choose. WEA
will not withhold cooperative advertising or other promotional funds on the basis of the
price at which WMG product is advertised in the media or promoted in your stores. WEA may
announce suggested retail prices, but retailers remain free to sell and advertise WMG
product at any price they choose.
Concurrence:
__________________________
William L. Lanning, Esq.
Federal Trade Commission
Bureau of Competition |