WASHINGTON, DC: The Federal Trade Commission this week extracted a $4 million (€3.09m; £2.04m) settlement from Sony BMG Music Entertainment for selling music CDs with covert inbuilt anti-piracy software that damaged buyers' computers when they tried to delete it.

Moreover, in a commercial arrangement between the Japanese-German giant and Microsoft, the software restricted the devices on which music could be played to those manufactured by Sony and Microsoft. It also limited to three the number of copies that could be made.

Pronounced FTC chair Deborah Platt Majoras: "Installations of secret software that create security risks are intrusive and unlawful. Ordinary experience with CDs would not lead consumers to expect these limits."

The FTC has instructed SBMG to exchange all affected CDs purchased before December 31, 2006; also to reimburse consumers by up to $150 to compensate for damage done when they tried to remove the software. The requirement runs until the end of June.

From now on the company must clearly disclose limitations on consumers' use of music CDs and the disks may install software on consumers' computers only with their knowledge and permission.

Data sourced from Wall Street Journal Online. additional content by WARC staff