Sony BMG to Reimburse Customers for CD Damage

Associated Press January 31, 2007; Page B4

U.S. regulators said Sony BMG Music Entertainment agreed to reimburse consumers as much as $150 each for damage to their computers from CDs with hidden antipiracy software.

According to the Federal Trade Commission, which announced the settlement, Sony BMG’s antipiracy software limited the devices on which music could be played to those made by Sony Corp., Microsoft Corp. or other Windows-compatible devices.

The software also restricted the number of copies of the music that could be made to three, the agency said, and “exposed consumers to significant security risks and was unreasonably difficult to uninstall.”

Last month, the company, which is a joint venture of Japan’s Sony Corp. and Germany’s Bertelsmann AG, settled similar cases with more than 40 states, agreeing to pay more than $4 million and to reimburse customers.

“Installations of secret software that create security risks are intrusive and unlawful,” FTC Chairman Deborah Platt Majoras said of the latest settlement. “Ordinary experience with CDs would not lead consumers to expect these limits.”

The settlement requires the company to allow consumers to exchange through the end of June the affected CDs purchased before Dec. 31, 2006 and reimburse them as much as $150 to repair damage done when they tried to remove the software.

It also requires Sony BMG to clearly disclose limitations on consumers’ use of music CDs and prohibits it from installing software without consumers’ consent.

For two years, Sony BMG must provide an uninstall tool and patches to repair the security vulnerabilities on consumers’ computers and must advertise them on its Web site. The company also is required to publish notices describing the exchange and repair-reimbursement programs on its Web site.

Sony BMG said it was pleased to settle the matter. The company didn’t admit a law violation, and the settlement is subject to public comment for 30 days, after which the FTC will decide whether to make it final.

In 2005, the company shipped more than 12 million compact discs on 52 Sony BMG titles, each loaded with one of two content-protection programs, and about seven million of those CDs were sold. The Digital Rights Management software installed itself on consumers’ computers without their knowledge or consent.

The FTC said the software monitored users’ listening habits and sent them targeted marketing messages based on those habits.

Sony BMG has maintained that it didn’t use the software to collect personal data about consumers without their consent—an assertion backed up by an outside company commissioned by Sony BMG to audit its use of the copy-protection software.

Sony BMG ultimately recalled the discs with one of its antipiracy programs, known as XCP, in November 2005 and released a way to remove the files from users’ computers. It also released a software patch to fix a potential security hole resulting from a second content-protection program, known as MediaMax 5.0.

Copyright © 2007 Associated Press