Oasis CDs were alleged to be among CD-Wow's cheap imports

The High Court in London ruled that the site's owners, Music Trading Online, were "in substantial breach" of a 2004 agreement to stop selling such albums.

Record companies complained that the site broke a deal not to buy cheap CDs in places like Hong Kong and re-sell them in the UK without permission.

CD-Wow said the judgement "spelled disaster for millions of music fans".

The company will be fined in July after an inquiry into how much it owes the record labels who complained of copyright infringement.

'Warning'

With retail sales of £21.7m in the UK in 2005, CD-Wow was the third largest online music retailer in the UK after Amazon and Play.

The company denied deliberately breaking its 2004 court undertaking and put any breach of copyright down to human error. But the High Court rejected their argument.

The music industry trade body, the British Phonographic Industry (BPI), said the ruling sent a warning to other companies that imported CDs from outside Europe.

"The BPI will be using this judgment to ensure that no other company unfairly undermines legitimate retailers in the UK that are trading successfully and respecting the law," BPI lawyer Roz Groome said.

'CD woe'

But CD-Wow, which offers albums by acts like Oasis and Robbie Williams for as little as £6.99, condemned Tuesday's judgement as "CD woe".

The company said the albums in question were bought legitimitely from the record companies themselves overseas.

"At a time when the record industry is losing vast revenue to piracy, it seems ludicrous that they can set out to destroy a section of the market that is actually making them money," said founder Henrik Wesslen.

The Hong Kong-based retailer is now calling for a full review of copyright law that it claims "serves to line the pockets of the music industry at the expense of the consumer".