After initial agreements failed to curtail the price war, Mr. Pitofsky said, the music companies toughened the agreements. The new deals prohibited retailers from advertising discount prices even in ads that the retailers paid for. Mr. Pitofsky said the agency had discovered a memorandum sent by one industry executive describing the more restrictive program as ''MAP with teeth.''

Commission officials said that in the few instances in which the retailers violated the agreements and advertised discounts, the manufacturers temporarily stopped making promotional payments, costing the retailers hundreds of thousands of dollars or more.

''This was industry-wide vertical price-fixing,'' Mr. Pitofsky said at a news conference, adding that the case was a classic illustration of the differences in antitrust enforcement between the Clinton administration and the Reagan administration in the 1980's, when officials had a different view of antitrust law. ''During the 1980's, retail price maintenance agreements were not challenged once,'' Mr. Pitofsky said.

A lawyer representing one of the companies said that the government had not presented a fair or complete picture of the marketing deal.

The lawyer, who spoke on condition of anonymity, said that many music stores had wanted the marketing agreements because the pacts stopped the discount stores from undercutting the music stores by using CD's as a loss leader to attract customers. According to industry analysts, many music stores were driven into bankruptcy because of the earlier intense competition on CD prices. ''The specialty stores were being very badly hurt,'' the lawyer said. ''These agreements were intended to assist those specialty stores maintain a wide selection of offerings, and as such, they were actually very pro-consumer.''

The lawyer said the companies had decided to settle the case because the marketing agreements were becoming outdated since they were not applicable to sales of CD's on the Internet, where CD sales have been growing steadily.

Other executives from the music companies said their profit margins were the same regardless of the wholesale prices charged by the retailers and therefore they would not have gained any money by curtailing discounting. But government officials disputed that contention, saying that the manufacturers stood to gain substantially from helping the specialty stores.