Company to shell out up to $195 per customer.
Sony BMG Music Entertainment has agreed to settle its court case with the US Federal Trade Commission (FTC) by paying up to $195 to customers who bought CDs which contained digital rights management software.
Sony BMG included the DRM software on CDs, which then installed additional software on the user's computer limiting the use of the music and the devices on which it could be played.
The software also reported back on the user's listening habits so that adverts could be targeted.
"Installations of secret software that create security risks are intrusive and unlawful," said FTC chairman Deborah Platt Majoras.
"Consumers' computers belong to them, and companies must adequately disclose unexpected limitations on the customary use of their products so that consumers can make informed decisions regarding whether to purchase and install that content."
Sony's DRM software meant that users could not transfer music to any portable media player except those manufacturers by Sony or Microsoft, thereby excluding 80 per cent of the market.
Under the settlement Sony must replace any CDs containing the software purchased before 31 December 2006, and pay up to $195 to cover any damage caused to the users' computers.
Sony will also have to pay for the CDs to be returned from retailers, and provide full accounts of the recall to the FTC. Customers have until 31 June to claim compensation.
The FTC voted 5-0 to accept the agreement but asked interested parties to make representations within the next month before confirming the terms and conditions. Any settlement will not constitute an admission of illegality by Sony.
Full details on the affected CDs, and how to make a claim for compensation, can be found at sonybmgcdtechsettlement.com.