THE country's biggest music retailer yesterday dismissed complaints

about ''excessive'' profits on compact discs as consumer watchdogs

stepped up demands for a new inquiry into prices.

W. H. Smith, owner of the 300-store Our Price music chain, said it had

nothing to fear from a fresh investigation into why CDs cost #4 to #5

more than identical recordings on vinyl and cassette tapes although they

all cost about the same to produce.

The Consumers' Association said: ''Consumers are fed up with CD price

levels.''

Its protest came as Sir Bryan Carsberg, the Director General of Fair

Trading, reviewed files on an earlier 15-month investigation into CD

prices.

He said in a letter to Labour consumer spokesman Nigel Griffiths that

he would review the evidence before deciding whether there was a case

''for additional work and perhaps formal regulatory action''.

Sir Bryan's letter said there were some indications that CD prices

were higher than necessary but the evidence was not clear-cut.

Mr Griffiths, who has been campaigning on CD prices, said: ''CDs are

overpriced and far dearer than the component costs merit.''

Mr Stephen Locke, the head of policy at the Consumers' Association,

said Sir Bryan needed to try to explain the causes of excessive UK

prices.

W. H. Smith spokesman Kevin Hawkins said: ''There is no way our profit

margins on CDs can be described as excessive.

''If Sir Bryan feels the first inquiry missed out anything, we will

happily cooperate with him.''

Total sales of CDs, cassettes and vinyl LPs during the last financial

year were worth approximately #1000m -- of which vinyl's share was just

#60m while CDs took about half the total.

An EC probe into CD prices has been ruled out by the Brussels

competition policy commissioner, Sir Leon Brittan, the British

Phonographic Industry said tonight.

The BPI, the trade body for the UK recording industry, said the ruling

came in a European Parliament written answer it had obtained.

Sir Leon said there was ''insufficient evidence'' about any

price-fixing cartel in CDs or any other anti-competitive practices

''within the European Community in general and in the UK in

particular''.

BPI director general John Deacon added: ''The average price of CDs in

the UK sits quite clearly in the middle band of typical retail prices

throughout Europe.

''Over a third of CDs sold in the UK are at budget or mid-price. The

pricing of the industry's products is more competitive than ever.''