In Re Digital Music Antitrust Litigation
812 F. Supp. 2d 390
S.D.N.Y.2011Background
- TCAC repeats prior antitrust allegations against major record labels for online music distribution; joint ventures MusicNet and pressplay used to exchange pricing terms and enforce MFN clauses.
- Plaintiffs seek a nationwide class of digital music purchasers alleging price-fixing and use restrictions in Internet Music.
- Defendants include Bertelsmann, Sony BMG, Sony, Capitol Records (EMI North America), EMI Group North America, Capitol-EMI, Virgin, Time Warner, UMG, and Warner Music Group; parent companies are treated separately.
- The Court vacated its prior dismissal following Starr v. Sony BMG Music Entm’t and remanded for further proceedings; the TCAC remains substantially the same as previously considered.
- The Court analyzes purely federal and state antitrust claims, standing issues, and related procedural questions, under Twombly/Iqbal pleading standards.
- The decision also addresses newly added Illinois and New York state claims and the alleged liability of parent companies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether TCAC plausibly pleads a Section 1 antitrust conspiracy. | Starr supports plausibility of alleged parallel conduct due to context. | Defendants contend parallelism plus conspiracy is insufficient without more. | TCAC plausibly pleads a Section 1 claim; proceeding allowed. |
| Whether Ottinger settlement bars these claims. | Ottinger release lacks identical factual predicate to Internet Music claims. | Ottinger release bars future claims based on identical facts. | Ottinger does not bar the TCAC claims. |
| Antitrust standing of CD-purchaser claims. | CD purchasers injured by higher Internet Music prices should have standing. | Injury too attenuated; no direct link between Internet Music and CD pricing; Illinois Brick issues. | CD-purchaser standing is lacking; CD claims dismissed with prejudice. |
| Pleading intrastate conduct and state consumer-protection claims. | TCAC alleges intrastate conduct and deceptive practices across states. | Some states require intrastate conduct; consumer-protection claims not adequately alleged. | State-law claims largely allowed to proceed; New York §349 claim dismissed. |
| Liability of Parent Companies for conduct of subsidiaries. | Parent companies caused or directed conspiracy via joint ventures. | Veil piercing not supported; no direct involvement or control linking to conspiracy. | Claims against Parent Companies dismissed. |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (pleading must show plausibility, not mere possibility of misconduct)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (U.S. 2007) (plausible antitrust claims require more than parallel conduct)
- Starr v. Sony BMG Music Entm’t, 592 F.3d 314 (2d Cir. 2010) (context matters; allegations can plausibly suggest an agreement)
- Wal-Mart Stores, Inc. v. Visa, 396 F.3d 96 (2d Cir. 2005) (release analysis depends on identical factual predicates)
- In re NMV, 350 F. Supp. 2d 160 (D. Me. 2004) (state antitrust and consumer-protection analysis; Illinois Brick considerations)
- Associated Gen. Contractors v. California State Council of Carpenters, 459 U.S. 519 (U.S. 1983) (antitrust standing factors including directness and foreseeability)