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August 30, 2004

CDs Going to Iowa Libraries

CD distribution wraps up nationwide antitrust case, which also resulted in payment of almost $1.6 million to 113,000 Iowans in February.

DES MOINES.   Over 56,000 compact discs are now being delivered to 305 public and academic libraries in Iowa as a result of a nationwide antitrust case and settlement.

Iowa and other states had alleged that several large music distributor companies and music retail companies used illegal tactics to maintain artificially high retail prices for music CDs.

"We think the libraries are among the best places to send CDs in order to benefit the most possible Iowans," said Attorney General Tom Miller. "The case also resulted in distribution of almost $1.6 million last February to about 113,000 Iowans who filed a claim," he said.

"Most important, we think the action helped restore fair competition in a huge industry."

Iowa's total share of the national settlement is over 57,000 CDs. About 56,000 will go to 278 public libraries around the state and 27 college and university academic libraries. Libraries 'opted-in' in February if they chose to receive CDs under the settlement. About 1400 CDs also are going to nine facilities operated by the Iowa Braille & Sight Saving School and the Dept. of Human Services. Most of the CDs, about 84%, are going to the community public libraries.

Public libraries will receive a minimum of 100 CDs plus a proportion based on population served. The number will range from about 100-200 CDs each for 240 of the state's smaller public libraries, up to over 2,600 CDs for the Des Moines Public Library system, the largest in the state. The compact discs were slated to arrive in Iowa at the end of last week and into this week. CDs come from over 1,950 titles and a very wide variety of artists and genres, including rock, classical, country, roots, jazz, blues, Latin, children's, soundtrack, and holiday.

"The CD distribution is a novel and we hope effective way to give some additional compensation to consumers for the harm caused by the antitrust violations the States alleged," Miller said. "We are very grateful to the State Library for working very hard on this project."

"Iowa libraries are very pleased to receive the CDs, especially during these tight budget times," said State Librarian Mary Wegner. "We know that Iowans will benefit from this program."

Background -- The Antitrust Case:

The lawsuit and settlement, which eventually included most states and territories, alleged that five large music distributors and three large music retailers entered into illegal conspiracies to raise the price of prerecorded music to consumers in the late 1990s. The suit alleged the unlawful scheme was designed primarily to stop some other retail outlets -- such as Best Buy and Target - from offering recordings at discounted prices. States were led in the action by NY, FL, CA, and TX.

The music distributor defendants in the lawsuit were Bertelsmann Music Group, Inc.; EMI Music Distribution; Warner-Elektra-Atlantic Corporation; Sony Music Entertainment, Inc.; and Universal Music Group. The national retail chain defendants were Transworld Entertainment Corporation, Tower Records, and Musicland Stores Corporation (Sam Goody.)

The States' lawsuit was filed in August 2000 and settled in September 2002. The Court approved the settlement in 2003, but unexpected appeals (not initiated by the States or defendants) delayed implementation of the financial payments to consumers and the CD distribution.

Background -- Payments to Consumers, and CD distribution:

As part of the settlement, the U.S. District Court for the Southern District of New York approved payments to consumers who filed claims, and distribution of CDs by the states. After appeals were concluded that delayed the case, the claims process for individual consumers and the CD distribution were handled by a Court-approved Claims Administrator based in Minnesota.

The cash payment process culminated in February, when 113,882 Iowans received a check for $13.86 apiece. The total paid to Iowans was $1,578,404.52. About 3.5 million Americans received the $13.86 refund. Iowans filed over 3% of the claims filed nationwide, compared to the state's 1% share of the US population. Only ten much larger states received more in CD refunds. "Iowans filed for refunds at a faster clip than anywhere else in the nation," Miller said.

The CD distribution process was launched in February when public libraries, academic libraries and DHS facilities and the Braille & Sight Saving School chose whether or not to receive CDs at no cost. The CDs had been selected earlier by a committee of other states working with the music industry defendants. The number of CDs going to recipients was based on a minimum, and on population served. State officials asked the Claims Administrator, Rust Consulting of Faribault, MN, to prepare several distribution plans in order to reduce as much as possible the number of duplicate CD titles going to individual recipients.

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More information:

For this and previous news releases from the Iowa AG's Office: (click on news releases and publications.)

Click here for a list of CD recipients in Iowa and how many CDs they are receiving.

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