The UK High Court has ordered Hong Kong based CD-Wow to pay the music industry £41m damages (£37m + interest) after having been found guilty of illegally importing CDs from Asia into Europe.
CD-Wow sells its’ CDs for £6.99 v rivals £8.95, with the result that it is the third most popular music site in the UK.
The British Phonographic Industry which brought the case, argued the cheap imports undermined the huge investments made by record companies in “home grown talent”.
Discriminatory pricing between markets is very common in many industries, with the UK often being singled out for the highest prices eg cars, drugs, clothes. Producers often use such practises to develop new markets for their products, which are subsidised by mature markets. However in some markets low pricing is also used to fend off competition from counterfeit products.
To operate differential pricing relies upon barriers to prevent seepage from the low price to the high price markets. When physical product has to be shipped or import barriers exist, seepage can be constrained.
Yet in a music sector increasingly reliant on music downloads for sales, attempting to apply different prices for people based on where they live around the world, but who are all downloading from the same server, seems ludicrous.
If we extend that line of reasoning, putting the same content on CD and shipping it at different prices (ex delivery & tax) seems equally odd.
That the courts support the practice of overcharging one set of consumers for a “luxury” (non-essential unlike say prescription drugs) homogeneous item may follow legal precedent, but seems to fly in the face of common sense.