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Music retailers charge Sony with unfair competition

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The National Association of Recording Merchandisers says it has filed a lawsuit against Sony Music Entertainment, alleging that the company is strong-arming retailers to point their customers toward its online shops.

The lawsuit, filed in U.S. District Court for the District of Columbia, claims that the "Big Five" recording company and its parent, Sony Corp. of America, is engaging in unfair competition and price discrimination by favoring its Columbia House record club and online music retailer CDNow over other retailers that are selling CDs by Sony artists. Columbia House and CDNow announced last year that they would merge; the companies will be jointly owned by Sony and Time Warner.

The complaint also states that Sony is unlawfully wielding its market power to force brick-and-mortar retail chains to stock CDs by Sony Music artists that also contain Web links for software and that include promotional material for stores operated by Sony.

The National Association of Recording Merchandisers (NARM) argues that Sony is taking advantage of its position as a content owner, CD distributor and retail owner to sell goods directly to consumers. NARM is asking the court to issue an injunction to stop Sony from engaging in the combined practices.

Although another of Sony's divisions, Sony Music Distribution, is a member of NARM, it is not a defendant in the lawsuit.

"Retailers have been complaining to Sony since early last year about the practice of using hyperlinks on CDs to divert retail customers to its own retail sites, but the complaints have fallen on deaf ears," Pamela Horovitz, president of NARM, said in a statement. NARM represents more than 1,000 music retailers.

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