UK music industry challenges online cut-price CD retailers

The UK music industry is to take on the online retailers that import cut-price CDs from outside Europe, in what could be a landmark parallel imports case. Last week the British Phonographic Industry (BPI) launched a test case against two web sites, CD Wow and Play.com.

Internet retailers are regularly pricing chart CDs as low as £7.99, whereas the same albums are available in UK high street shops for £13.99. CD Wow, which is based in Hong Kong but makes two-thirds of its sales in the UK, is able to offer such competitive prices as its CDs come largely from Asian countries, where prices are far cheaper. UK music bosses are livid because they see it as parallel importing, where genuine branded goods from outside the European Economic Area (EEA) are imported without the copyright owner’s consent.

CD Wow chief executive Philip Robinson announced last week that he was going to fight the action and pointed out that the company bought cheap CDs directly from the record companies in Asia. They are also expected to argue that the transaction takes place outside the UK (for example, in Hong Kong in the case of CD Wow), and so the company is not importing the product.

Simon Baggs, a solicitor at Wiggin & Co representing the BPI, said that both arguments were unpersuasive. He commented: “I find it difficult to accept that a website that has focused on the UK market – its price is quoted in sterling, it pays post and packaging to the UK and effectively markets and sells sound recordings that are popular in the UK – that, in spite all of that, it’s the customer bringing in the product rather than CD Wow issuing those recordings to the public.”

Baggs also argued that only a small proportion of CDs come via record companies outside of the EEA. In 2002, Tesco was taken to court by Levi Strauss after it purchased jeans in the US and, despite being unauthorised, sold them through its stores. Tesco was forced to stop the practice.

According to the solicitor, it is a ruling that the BPI could rely on, although the present case concerned copyright and the Tesco case was under trademark law. The ruling concerned the principle of exhaustion of intellectual property rights, whereby goods outside the EEA need the rights-holder’s consent to be brought into the EEA. “I believe the case has established that consent had to be given by the copyright owner and the person who has the right to seek relief from the courts in preventing the sale of non-EEA CDs is the UK record company and not a company in Hong Kong,” Baggs said.