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E-Commerce News
Recording Industry Faces Antitrust Suit Over Downloads; Single Publication Applies To Web Site Posting
July 5, 2006
RECORDING INDUSTRY FACES ANTITRUST SUIT OVER DOWNLOADS
Perhaps those music downloaders whose free spigot got turned off by the Recording industry will get the last laugh after all. A group of them recently filed a federal class action in California against several record labels contending that those labels violated federal antitrust law by conspiring to fix the price of downloadable music.
The lawsuit names Sony BMG Music Entertainment, Sony Corp. of America, Bertelsmann Inc., Universal Music Group, Time Warner Inc., Warner Music Group Corp., and EMI Group PLC. The lawsuit calls the trade group Recording Industry Association of America ("RIAA") an unnamed co-conspirator in the scheme to fix prices. Plaintiffs also allege violations of state unfair deceptive acts and seek damages, including treble damages and disgorgement, plus injunctive relief.
The plaintiffs are residents of California, Massachusetts, New Mexico, Texas, and Iowa. According to the lawsuit, the alleged conspiracy occurred after labels fought the availability and distribution of online music.
The plaintiffs allege in their complaint that "[u]ltimately, when Online Music became inevitable, Defendants then conspired to fix and maintain the prices for such product. . . . Plaintiffs and members of the Classes have paid more for Online Music and [compact discs] than they would have in a market free from Defendants' competitive restraint." According to the plaintiffs, the labels agreed to a wholesale price of 70 cents per song to retailers, up from the original 20 cents charged by industry-formed joint ventures, with the goal to keep CD prices high.
The federal case comes on the heels of a Justice Department announcement that it is looking into the prices consumers pay for music downloaded from the Internet. The DOJ has not yet filed suit.
SINGLE PUBLICATION APPLIES TO WEB SITE POSTING
Privacy Act claims arising from Internet postings are subject to the same "single publication rule" that courts have traditionally applied to defamation claims, according to a recent decision by the United States Court of Appeals for the Ninth Circuit.
The case had its roots in an employment dispute between the Army Corp of Engineers and a former manager. The manager was stripped of his duties in 1997, after the manager had challenged the corps over certain environmental issues. In 1999, the corps and the employee agreed to settle a dispute over his termination. As part of the settlement, the corps agreed to "convert the basis" of the employee's termination from "excessive absence and failure to follow leave procedures" to "continued absence due to [stress-related] illness," and to purge the former explanation from its records.
In September 2000, in response to published newspaper articles that criticized the corps and mentioned the employee's complaints that the corps had thwarted his efforts to enforce wetlands violations, the corps posted a response to the articles on its Internet Web site in which it stated that the employee "was removed for excessive absence due to illness." Although that posting was removed on Nov. 27, 2000, the employee alleged that the next month he discovered the same information posted on the corps' public affairs Web site.
On Nov. 5, 2002, the employee filed suit, alleging that the corps' original posting on its Internet Web site violated the federal Privacy Act. On Nov. 25, 2002, the employee filed an amended complaint which alleged that the corps had posted private data about him on that site "continuously" during November 2000. On March 10, 2003, he filed a second amended complaint, alleging Privacy Act violations during December 2000 in the posting on the corps' public affairs Web site.
The corps moved to dismiss based on the Privacy Act's two-year statute of limitations. The employee responded that the continuously available Internet posting was a perpetual violation, and that he only learned that the disclosures were "willful" when the corps informed him in October 2001 that the postings of his data sought to "defend" the corps from "media inquiries," and thus the statute of limitations began to run from that date. The trial court disagreed, however, ruling that the statute of limitations barred all of the employee's claims.
The appellate court affirmed the trial court. It found that a Privacy Act suit must be filed "within two years from the date on which the cause of action arises," or within two years of the plaintiff's discovery of any material and willful misrepresentation of information required to be disclosed to the plaintiff.
Here, even though the employee acknowledged that he learned in September 2000 of the corps' Web site posting, he asserted that his original and first amended complaints filed in November 2002 were still timely because the violation was a continuing tort until the Internet posting was removed on Nov. 27, 2000. This raised the issue of whether the single publication rule applied.
The corps' motion to dismiss put in issue the "single publication rule." That rule provides that "any one edition of a book or newspaper, or any one radio or television broadcast, exhibition of a motion picture or similar aggregate communication is a single publication." The effect is that the aggregate communication "can give rise to only one cause of action in the jurisdiction where the dissemination occurred, and result in only one statute of limitations period that runs from the point at which the original dissemination occurred." The question for the court was whether the rule applied to Internet postings.
The court found that the rule applied. According to the court, Internet publication is similar to other media in that it is "intended for a broad, public audience," and once published, no further act is needed to make it available to the public. The same policy considerations--protecting defendants from harassment via multiple suits and restraining the burden on courts--apply to each of those forms of "aggregate communication."
The court found a "serviceable" analogy between Internet and print publications. Both are aimed at the broad public and are considered "published" when made available to the public. The public policy behind the single publication rule--"to protect defendants from harassment through multiple suits and to reduce the drain of libel cases on judicial resources"--applies to both print and Internet media, according to the court. Indeed, the court noted that given the broader dissemination of Internet postings, the need for limits is even greater.
The employee argued creatively that hosting a Web site is similar to responding to a series of citizen telephone calls. Each separate response constitutes a violation. But the court rejected the phone analogy, noting that "unlike a series of telephone calls, once a host posts information on the Internet, the host may remain passive and does not have to respond anew each time an Internet user accesses its website."
Under the single publication rule, the court found that the original and first amended complaints were untimely. Although the employee argued that the second amended complaint involved a different site, the court said that the claim, filed in March 2003, was still filed more than two years after the alleged disclosure on the public affairs site in December 2000.
The "single publication rule" has traditionally been a check on what could otherwise be perpetual liability for publishers. Given the ability to forward and bookmark Internet postings, it may even be more necessary in cyberspace than in the world of traditional publishing.
This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.