The British and Irish record industries have struck a mighty blow for consumers by forcing online retailer CD Wow to stop selling CDs imported from outside the EEA.
Upshot: customers will have to pay an extra £2 for each CD. Currently, CD Wow charges £8.99 for CDs. CD Wow's price increases could mean a big fall in sales for the company, considering that its prices will now be more expensive than those of many supermarkets.
And boy, is the music industry happy. "It is not the consumer that will suffer, just CD Wow's profit margins. They made a lot of money out of cheap CDs," one insider told the FT.
CD Wow settled with the British Phonographic Institute (BPI), two weeks before the two sides were due to meet in court over parallel importing. It still faces music industry action in Germany
The retailer imported cheap CDs from Asia and sold them in Western Europe. CDs are cheaper in Asia, because the music industry deploys differential pricing. Briefly, record companies charge more in Europe because they can.
Where there is differential pricing, e-tailers and consumers can arbitrage the difference to their advantage, by importing goods from the cheaper country. Manufacturers use, when they can, restrictive distribution contracts to stop cheap imports. Within the EU, this is illegal - we're supposed to be a Common Market, right?
But trademark law, and maybe copyright law too - but that has to be tested in court - supports the manufacturer in enforcing restrictive distribution for their goods which come from outside the EEA, as the landmark case between Levi Strauss and Tesco confirmed.
So much for Globalisation. It beggars belief that CDs should be subject to differential pricing. They are small commodity items and there are millions of them, which makes them ideal for buying and selling over the Internet. According to the FT, the BPI is mulling over sueing Amazon.com over parallel exports to the UK. A BPI rep later downplayed, but did not exactly deny the report, in an interview with The Register. ®