A Brooklyn, N.Y., man has filed an antitrust class action lawsuit against Guitar Center, Fender and NAMM, claiming that the three conspired to raise prices on acoustic and electric guitars, violins, amplifiers, and strings between January 1, 2005, and December 31, 2007, in violation of the Sherman Antitrust Act. Several accusations were made in the lawsuit, as listed below. Among them is the statement, “Guitar Center possesses, and has demonstrated, a dangerous probability of achieving monopoly power in the relevant market. Guitar Center continues to dominate this market through…unlawful conduct.”
Lead plaintiff David Giambusso purchased a guitar from Guitar Center in 2007. The lawsuit directly refers to the FTC investigation against MI, which was settled with NAMM earlier this year. The complaint, filed on Sept. 11 in the United States District Court Southern District of California, claims Guitar Center could easily inflate prices due to its size. “Guitar Center is the only national chain and is viewed as dominant in the retail market, with 295 stores and the industry’s largest mail-order business and sales of $2 billion….Guitar Center dwarfs its next-largest competitor. Sam Ash is the No. 2 musical instrument retailer in the United States and operates 45 stores in California, Texas, New York, and nine other states....According to independent retailers, Guitar Center wields enormous power in the industry….Accordingly, retailers such as Guitar Center were able to raise prices above and beyond what they would be under competitive conditions.”
The lawsuit names Fender as a defendant. However, it is not mentioned by name in the 20-page document. However, Fender and Guitar Center are perhaps being referred to when the lawsuit points out, “The overall effect of [the] defendants’ anti-competitive, exclusive scheme has been to substantially foreclose and impair competition.” Their actions “stifled actual or potential rival manufacturers” that “would have achieved much greater sales than they actually did…given the cheaper prices that they charged…and would have posed a far greater competitive threat to [the] defendants.” Because of these actions, “Members of the class [consumers] were compelled to pay, and did pay, artificially inflated prices for the musical instruments they purchased.”
The lawsuit claims, “Guitar Center has conspired with NAMM to control prices and exclude or destroy competition in the relevant markets and engaged in other acts with the specific interest to achieve monopoly power in the relevant product market.”
NAMM is also blamed because the FTC “alleged that, between 2005 and 2007, NAMM organized various meetings and programs for its members at which competing retailers of musical instruments were permitted and encouraged to exchange information and discuss strategies for implementing minimum advertised price policies, the restriction of retail price competition, and the need for higher retail prices.”
The FTC settlement does not admit any NAMM wrongdoing.
The lawsuit specifically states, “During the class period (2005-2007), NAMM was the industry’s vehicle to control prices in the United States fretted instrument product market.”
The suit seeks punitive and treble damages, an end to the alleged illegal practices, and a recovery of the plaintiffs’ attorney fees. Treble damages, which references a statute that permits a court to triple punitive damages, are common in antitrust lawsuits. The plaintiffs are being represented by Mark Tamblyn of Wexler Wallace LLP and Squitieri & Fearon LLP.
Editor’s Note: The Music & Sound Retailer is merely reporting allegations as filed and stated in the class action lawsuit mentioned above. We do not agree, disagree, or comment about any of the allegations put forth in this lawsuit.
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