## Facts

- Consumers filed a putative class action alleging major record labels conspired to fix prices and impose restrictive terms for digital music sold over the Internet, violating Sherman Act § 1.
- Defendants allegedly controlled over 80% of U.S. digital music sold to end purchasers.
- The labels created and used two digital-music joint ventures—MusicNet (Bertelsmann, WMG, EMI) and pressplay (UMG, Sony)—through which labels distributed music directly to consumers and executed related distribution agreements.
- Plaintiffs alleged the joint ventures and an industry trade association facilitated interfirm communication about pricing, terms, and use restrictions.
- The ventures allegedly offered uniformly high subscription prices and restrictive digital rights management limits; early access to full major-label catalogs allegedly required subscribing to both services at roughly $240 per year.
- Plaintiffs alleged defendants collectively refused to offer less-restrictive, lower-priced digital music options through popular outlets.
- Plaintiffs alleged defendants used most-favored-nation clauses in licensing and venture-related contracts to prevent discounting and to keep prices and terms uniform across labels.
- Plaintiffs cited parallel conduct (similar pricing and restrictions across firms and channels) and referenced state and federal investigations into potential online music price-fixing.
- The district court dismissed under Rule 12(b)(6) for failure to plead a plausible agreement under Twombly; plaintiffs appealed.

## Issues

1. Whether the complaint alleged sufficient nonconclusory facts to plausibly suggest a horizontal agreement among the labels to fix digital-music prices and terms, as required by Sherman Act § 1 under Twombly and Iqbal.

## Decision

- The Second Circuit vacated the dismissal and remanded.
- The court held the complaint pleaded enough factual matter, taken as true, to suggest that an agreement was made among defendants.
- Applying Iqbal, the court disregarded conclusory allegations and assessed whether the remaining factual allegations plausibly supported an inference of conspiracy.
- The court concluded plaintiffs alleged more than parallel conduct by pleading “plus factors,” including joint-venture mechanisms, MFN provisions, and allegations of supracompetitive and uniform pricing and restrictions in a concentrated market.

## Legal Principles

- To state a Sherman Act § 1 claim, a plaintiff must plausibly allege an agreement (a contract, combination, or conspiracy) and an unreasonable restraint of trade.
- Under Twombly and Iqbal, a complaint must contain enough factual matter to state a claim that is plausible on its face; courts need not accept legal conclusions framed as factual allegations.
- Parallel conduct alone does not plausibly plead a § 1 conspiracy; plausibility may be supported by “plus factors,” including facilitating practices, a common motive to conspire, or conduct that appears contrary to independent self-interest.
- Allegations that most-favored-nation clauses were used to deter discounting and maintain uniform, supracompetitive pricing can support a plausible inference of coordination when considered with market structure and other factual context.
- At the Rule 12(b)(6) stage, the question is plausibility, not proof; plaintiffs are not required to eliminate all lawful explanations before discovery.

## Conclusion

The Second Circuit held that detailed allegations about joint ventures, MFN-based price discipline, uniform restrictive terms, and concentrated market conditions plausibly suggested a horizontal agreement to fix digital-music prices and restraints, so the antitrust complaint survived dismissal and the case was remanded for further proceedings.


Starr v. Sony BMG Music Ent. , 592 F.3d 314 (2d Cir. 2010)