CD WOW! ordered to pay mammoth £41 million in damages
Hold on. Hear that jingling? It's the sound of money bags being delivered to music companies in the city of London – firms that say they're suffering dwindling CD sales and massive piracy.What these companies won't accept is that consumers just want value for money – something that the giants of the music industry simply never deliver in the UK.
Maddeningly, events this week in the High Court mean that one way we've been able to save a bit of money just went south, very quickly after the Hong Kong e-tailer CD WOW! was hit with a massive £41 million fine.
This resulted from the court's March ruling that the company was guilty of a 'substantial breach' of a 2004 agreement to stop parallel importing CDs into the UK.
These grey-imported CDs aren't fakes, they're bought through legal distribution channels and result in revenue for the record companies and the artists.
However, the channel they're bought through is outside of the UK where CD WOW! pays far lower prices than UK resellers – allowing the company to undersell UK stores.
CD WOW! attempted to play down the breach, saying that the discs bought under cover by the record industry's trade body the British Phonographic Industry (BPI) had been sold as a result of 'human error'. This, however, failed to wash with the big-wigs of the London court.
It's hard to judge how big an impact the £41 million fine will have on CD WOW! but from the details available to us – which only cover 2005 – it's equivalent to almost twice the value of all the media the company delivered in that one year to the UK. So, the firm almost certainly is going to have to stop deliberate and accidental parallel importing into the UK or risk being driven out of business completely.
But why is it, you might wonder, that record companies sell CDs at different prices around the world? Well, the critical factor is how much consumers are willing to pay.
Over in the USA, they simply wouldn't accept the outrageous prices we in the UK have to pay. But, in some countries, the reason is that the average wage is so small that, until recently, the only CDs anyone could afford were pirated copies.
That's given rise to a huge illegal pirate-music industry. To try to contain this, the record companies have massively reduced the trade price of CDs in China and other parts of Asia.
For the record companies to be able to afford to do that, though, they need to keep prices high elsewhere. So, in effect, consumers in the UK and other developed countries are paying more than they should and are subsidising the music industry's global fight against piracy.
What CD WOW! had been doing, though, was not selling pirated albums. Instead it had been buying legal albums where they're cheapest and, according the court, selling them in the UK where, in our view, prices are artificially inflated.
The High Court has repeated ruled this illegal – there have been many such rulings in other EU countries as well – and CD WOW! has, the court decided, continued to flout the law and, thus, been heavily punished.
Well, you can't easily argue with how the law has been applied but what you can argue with is whether or not the law is justified.
We're always hearing about global markets and fair trade but, it seems to us, that what's really happening is that courts are only looking after the interests of multi-national companies and taking little if any account of the interests of consumers.
These firms always argue when faced with the prospect of legislation that might curb their powers and profits that the market should decide, not government or the courts.
However, when the market does actually decide, these same firms immediately turn to the courts using laws that, miraculously, are already in place to protect their interests.
We're not arguing for a complete free-for-all – far from it. But what we would like to see is the law being used to fairly balance the interests of big business and consumers, not – as at present - favouring one massively over the other.
All the while that we in the UK are paying through the nose for CDs and a whole bunch of other things – including software, booze and even food – record companies and other global businesses can't reasonably expect an ounce of sympathy from UK consumers.
They have to realise that they need us to be on their side, not harbouring grudges against them – and the law-makers need to understand this, too. Then companies need to change their way of working and governments need to bring a better balance into the law. Otherwise, the music industry – and a lot of others - will continue having to fight guerrilla wars against their own customers.
Allowing that situation to continue would not only be bad for the companies themselves but also for UK resellers and any firm within the lawful distribution chain. It would also hurt the nation as a whole since it fuels piracy and pushes sales outside legal channels where no taxes are paid.
