BRITISH record companies yesterday vowed to continue their battle against unlawful parallel importers after securing a settlement in a legal dispute with CD Wow!, a company that sells discounted CDs from the Far East to shoppers in the UK.

The British Phonographic Industry (BPI) said it had already launched a separate lawsuit against Play.com, a Jersey-based online retailer of CDs and DVDs that operates in a similar way to CD Wow!, and would continue monitoring well-known online vendors such as Amazon.com for possible parallel importing.

Under the settlement, much of which is confidential, CD Wow! agreed to stop selling in the UK records from low-cost markets and said it would buy its goods from Europe instead.

The CD Wow! website offers popular CDs such as Outkast’s Speakerboxx/The Love Below and Dido’s Life For Rent at £7.99. After the settlement it will add £2 to the price of its CDs sold in the UK and the Irish Republic, bringing them into line with the online prices of rivals such as HMV and Virgin Megastores. High street prices can be as much as £13.99.

CD Wow! is believed to have agreed to pay legal costs and damages to the BPI, which filed the lawsuit on behalf of a number of British record companies, but made no admission of breaking the law. The company said that it would continue to sell CDs sourced from the Far East to internet customers in continental Europe.

The BPI based its argument on EU laws that prevent the resale of products bought outside EU member states. It alleged that CD Wow! bought the CDs legitimately outside the European Economic Area but sold them illegally in the UK. The record companies used a precedent set by Levi Strauss, in 2001, in which the jeans company used the same EU laws to stop Tesco importing low-cost jeans from outside Europe. Levi’s argued that its brand could be sullied if retailers sold products from outside the official distribution regime.

Peter Jamieson, the BPI chairman, said: “I am delighted that we have been able to resolve this case on agreed terms without the need for a trial.”

However, Philip Robinson, founder of CD Wow!, denied it had been doing parallel importing. “We are a Hong Kong company that is selling and distributing products from Hong Kong, so each sale is a personal import by a customer. That is not parallel importing.”

Consumer groups attacked the outcome, saying it would lead to higher CD prices. Phil Evans, of the Consumers’ Association, said: “The fact that CD Wow! was so successful is proof that the UK music industry has been ripping customers off for years and that UK consumers were seeking ways to buy reasonably priced CDs.”

He added: “This is a sad day for consumers and a sad day for e-commerce. The arrogance of the music industry is staggering. What is the point of the internet in commercial terms if consumers are prevented from using it to buy goods from abroad?”

CD Wow! said at the time the BPI filed its lawsuit that it had a strong case and would take its fight to the High Court.

The company said it had secured consent to supply its products worldwide, including Europe, when it was launched in February 2000. But Mr Robinson said he had decided to settle the case because pursuing it further would have been “too costly, in terms of management time and money”.

He added: “The risk reward wasn’t great enough.”