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    LONDON, Aug 8 (Reuters) - EMI Group Plc said on Tuesday it
would vigorously defend claims by U.S. states that it fixed
compact disc prices after its shares tumbled 9 percent on news a
suit had been filed against leading record labels.
    EMI shares were hammered lower after 28 U.S. states filed
suit against EMI and four of the world's other biggest record
labels, accusing them of fixing prices of compact discs and
demanding "hundreds of millions of dollars" in damages.
    "On the basis of the information currently available, EMI
believes the claims are without merit," an EMI spokeswoman told
Reuters.
    Alongside EMI, the labels involved in the suit include Time
Warner Inc.'s Warner music group; Sony Corp.'s Sony Music
Entertainment; Seagram Co.'s Universal Music Group; BMG, the
music unit of Bertelsmann AG.
    The suit centers on a policy called "minimum advertised
pricing" (MAP), under which the labels subsidised advertising
for retailers that agreed not to sell CD's below a minimum price
determined by the labels.
    "EMI has been advised by leading anti-trust counsel that its
minimum advertised pricing policy was lawful and it will be
defending the claims vigorously," the EMI spokeswoman said.
    EMI shares closed 7.62 percent down at 600 pence, just off a
session low of 580 pence, with almost 1.5 million shares traded.
    "You mention U.S. lawsuit and everyone dives for cover. It's
very difficult to say at this stage what the likely implications
for EMI will be," said one analyst.
    The suit, filed in the U.S. District Court for the Southern
District of New York, alleges the policy increased CD prices in
violation of state and federal antitrust law, kept CD prices
artificially high and penalised retailers who did not take part.
    In a settlement with the U.S. Federal Trade Commission
announced in May, the five labels agreed to ban the MAP policy
for seven years. The settlement did not require the labels to pay
any damages, nor did the labels admit any wrongdoing.
    The suit filed by the 28 U.S. states on Tuesday also named
three retailers as defendants: MusicLand Stores Corp., Tower
Records and Trans World Entertainment Corp.

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