Sony's Music Unit Sued Over Customer Steering

February 1, 2000

Sony's Music Unit Sued Over Customer Steering

By BLOOMBERG NEWS

ashington, Jan. 31 -- Sony Music Entertainment was sued by retailers who say the company illegally steers customers to its online stores by including hyperlinks on music compact discs.
The National Association of Recording Merchandisers filed suit today in federal court in Washington. The suit alleges copyright misuse, false advertising, unfair competition and illegal price discrimination in favor of Sony's own record club and online retailer.
"This gets a lot of these issues into the court," said Paula Horovitz, president of the trade association, which represents more than 1,000 music retailers, wholesalers and distributors. "We hope we can get the ground rules laid out as we get into an Internet age."
A new generation of compact discs, called enhanced CDs, includes video images and interactive features that appear when played on a personal computer. Sony and its competitors typically include a hyperlink on these video images that connects Internet users to an online store.
The retailers say they are being forced, in effect, to direct their own customers to a competitor: Sony's retail operation.
While Sony is not the only record company that engages in the practice, Horovitz said, it was singled out because of its "economic power." She said legal action against other music companies has not been ruled out.
Ms. Horovitz said the questions the lawsuit raises will become more important as such new technologies as DVDs and direct online downloads of digital-quality recordings increase their shares of the home entertainment market.
The lawsuit seeks a court injunction barring the practices, as well as unspecified damages and legal fees.
An official at Sony wasn't immediately available for comment.
Sony Music Entertainment, a division of the Japanese electronic company Sony Corporation, is based in New York.

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