Did Music Labels Lie To The Justice Department On Digital Downloads?

Legal Issues

from the new-evidence dept

This story involves quite a bit of ancient (in internet terms) history, so we’ll give a quick refresher for those who weren’t around or don’t remember. When the original Napster was being attacked by the recording industry, at least a few people within the industry recognized that they had to at least try to offer their own online music stores. The problem, though, was (of course) that they were scared to death of cannibalizing their own business, and so the two music label owned services, MusicNet and PressPlay, were dubbed MusicNot and PressPause for being about as useless as they could be — which (not surprisingly) meant they got no business. Still, as they were being set up, the efforts caught the attention of the Justice Department, who wondered if the labels were colluding over prices. Eventually, with both services failing miserably, and others starting to get into the space, the DOJ dropped the investigation, claiming they hadn’t turned up any evidence.

Meanwhile, following the fall of Napster, two of the record labels, Universal and EMI, both sued a third label, Bertelsmann. When Napster was originally taking off, Bertelsmann has a forward-thinking CEO who actually recognized that sharing could represent the future of music — so he had the company invest in Napster (a move he was eventually fired for). This investment upset the other labels, as they wanted to have a united front against Napster — and having one of their core members break ranks was a huge problem. To show their displeasure, Universal Music and EMI took the amazing step of suing Bertelsmann. The claims were really problematic, in suggesting that investors might be liable for the actions of a company. Taken to the logical extreme, it would mean that you could be responsible for the legal misdeeds of any company whose stock you owned. For obvious reasons, this seemed problematic — but the case has continued.

Bringing these two stories together, is the fact that in that second (still ongoing) case, new evidence has been filed that suggests both EMI and Universal may have lied to the DOJ when both were being investigated concerning MusicNet and PressPlay. The evidence suggests that the two services were guaranteed to get the best prices for music and used consultants to share information that shouldn’t have been shared (normally called collusion). These facts were apparently hidden from investigators. It’s not clear what impact this would have either way — but the judge in the case has ordered both labels to turn over documents concerning this hidden info, including stuff that would normally be protected by attorney-client privilege, under the belief that the labels used their attorneys for illegal purposes to hide info. Yes, everyone must be shocked to hear yet another story of record labels breaking the law — just as our elected officials rush to give those labels more protection for their failing business models.