AllofMP3 Closer to Being Shut Down

While authorities in the United States and Europe can't directly shut down Russia music store AllofMP3.com, which they say sells songs without paying licenses or royalties to artists, they have been successful in cutting off the site's ability to take money from customers outside Russia.

PayPal, MasterCard and Visa have already stopped handling payments for the service, leading AllofMP3 to resort to a "voucher" system, which United States and European consumers could use to purchase music. Songs on the site are offered for pennies, far less than licensed services like Apple's iTunes.

The voucher system, however, received a major blow with the arrest of a 25-year-old man in London. According to IFPI, a group representing the recording industry internationally, the individual was the UK-based European sales representative for AllofMP3, selling vouchers on a Web site and auction services like eBay.

The man charged 10 pounds for each voucher, and transferred the money into various offshore bank accounts used by AllofMP3. Thousands of vouchers had been sold, according to Metropolitan Police who conducted a dawn raid earlier this month and seized computers and other documents.

"Despite false claims by the site that it pays record companies and artists, it has no permission from record companies to sell downloads in the UK and has been illegally undercutting legitimate services such as iTunes, Napster 2.0 and HMV Digital by not compensating the artists and record companies concerned," IFPI said in a statement.

For its part, AllofMP3 parent company Mediaservices continues to assert its legitimacy. "The availability over the Internet of the ALLOFMP3.com materials is authorized by the license # LS-3?-05-03 of the Russian Multimedia and Internet Society (ROMS). In accordance to the licenses' terms Mediaservices pays license fees for all materials downloaded from the site," a notice on the site says.

Mediaservices claims to pay royalties to ROMS, the copyright holder service sanctioned by the Russian Parliament, and to FAIR (Rights holders Federation for Collective Copyright Management of Works Used Interactively). Under Russian law, as long as a distributor of music pays 15% of its collection fees to ROMS, it's a legal service.

But regulators outside Russia don't agree with that assessment.

"Allofmp3.com is an illegal download service and the decision by major credit cards and payment services no longer to support it amply demonstrates that fact," remarked Geoff Taylor, head of British music association BPI. "British music fans should beware of voucher schemes like this one that seek to prop up an illegal service that rips off artists."

Pressure on the site continues to grow. AllofMP3 is blocked in Denmark and Germany, and an Italian version is under investigation. In December, United States music publishers sued the company for $1.65 trillion. In addition, Russia has been specifically asked to shut down the site if it wishes to join the World Trade Organization.