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01/11/2003 Archived Entry: "The Antitrust Settlement That Wasn't"
Posted by CKL @ 01:23 AM PST

You may have received an e-mail telling you that if you bought a music CD between 1995 and 2000, you're entitled to get $20 back from record companies because of an antitrust lawsuit settlement. No? Well, it's true. But read the fine print to find out why you probably won't see a dime.

Okay, so it's something of a victory for consumer advocates against some of the very media corporations who are trying to maintain their stranglehold on the music business. But it's a settlement, not a judgment, which means they were still able to weasel their way out of trouble by throwing money at the problem. And the consumers who were most directly affected by their conduct will see none of that money.

Check out the fine print at the settlement web site. It says, in no uncertain terms, that the settlement provides a sum of cash-- $67,375,000-- to be distributed to consumers who purchased CDs between 1995 and 2000, when the misconduct was alleged by the plaintiffs to have occurred. Individual payments will not exceed $20 per person, and to get your money, you have to submit your name and address for verification.

But here's the kicker: the minimum payment is $5 per person. If too many people file valid claims, none of them will get individual payments; rather, all $67+ million of the settlement money will go to non-profit and government institutions "to be used for music-related purposes or programs for the benefit of consumers who purchased Music Products."

Now let's do some math here. To cover legal fees, the plaintiffs may apply to the court for up to "21.5% of the Settlement Fund and 10.1% of the total Settlement." IANAL, but let's suppose that means that at most, 31.6% of the total cash settlement could be excluded from the distribution to consumers. That leaves 68.4% of $63,375,000, or $46,084,500. Divide that by $5, and we get 9,216,900. That's the maximum number of people who can file claims and get their money.

Over $30 billion worth of CDs are sold in America each year. Even if we highball it and say that each CD costs $20, and each consumer buys two CDs every month, that's still over 20 million people a year buying CDs. Multiply that by five years... you see where I'm going with this, don't you?

The gasoline on this particular fire is the e-mail chain letter. People are sending this to their friends, and if they'll believe that Bill Gates wants to pay them for forwarding e-mail, you can bet they're going to click on a link that promises to send them $20. The deadline for filing a claim is in March. I'm sure they'll have well over 9 million before the end of January.

So where does the money go, if not to consumers? The proposed settlement says: "the cash portion of the Settlement shall be distributed to not-for-profit, charitable, governmental or public entities to be used for music-related purposes or programs for the benefit of consumers who purchased Music Products." Notice the well-placed "or" in that statement. One of the aforementioned e-mail chain letters represents this as "donat[ing] the money to charity" and claims that this is "almost as good as getting it for yourself." Dream on! The 43 states that filed the lawsuit will split the money and do with it as they like. Not necessarily a bad thing, but let's call a spade a spade.

Moral of the story: big government is still more powerful than big business.

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Additional content copyright © 2005 by Loren A. Cheng