Sony Music Entertainment was slapped
with a lawsuit Monday by a group of merchants alleging that the company
unfairly forces retailers to direct customers to Sony’s online properties.
The National Association of Recording
Merchandisers (NARM) filed suit in district court in Washington D.C.,
charging Sony (SNE)
with unfair competition. The suit claims that Sony illegally embeds
hyperlinks to its CDs that direct listeners to CDNOW and Columbia House, companies in which Sony purchased a 37 percent stake in July.
The complaint also alleges that Sony engaged in copyright misuse, false advertising, unfair competition and illegal
price discrimination by favoring CDNOW and Columbia House over other retailers.
“We object to not having the option of buying CDs without these hyperlinks,”
said David Lang, president of Compact Disc World and member of NARM. “The
links come embedded in selected enhanced CDs and their presence is never even
communicated to retailers.”
“I’m angry that after all the effort Tower puts into helping Sony artists,
these links are being used to drive sales at Sony stores instead of at our
stores,” said Stan Goman, executive vice president of Tower Records and
chairman of NARM’s board of directors.
NARM is the not-for-profit trade association which represents more than 1000
member companies engaged in music retailing, wholesaling and distribution.
A Sony Music spokesperson said the company has not yet received the
complaint.