A federal appeals court on Wednesday reinstated an antitrust lawsuit accusing major record labels of conspiring to fix prices and terms under which their music would be sold over the Internet.

The U.S. Second Circuit Court of Appeals in New York said a lower court judge erred in dismissing the complaint alleging violations of the federal Sherman Act in October 2008.

Among the named defendants in the case are Bertelsmann AG, EMI Group, Sony Corp, Time Warner Inc, Vivendi SA and Warner Music Group Corp or various affiliates.

The plaintiffs contended that record labels entered into joint ventures and licenses that had the effect of creating artificial price floors for downloaded music.

They also said that when competitors started to distribute the labels' music, the defendants agreed to a wholesale floor of about 70 cents per song, which were enforced in part through restrictive license agreements.

Writing for a three-judge panel, Circuit Judge Robert Katzmann said the plaintiffs' allegations are sufficient to plausibly suggest a conspiracy to fix prices.

Noting that the defendants control more than 80 percent of digital music sold to U.S. purchasers, the judge pointed to one commentator who concluded that nobody in their right mind would want to use two of the music services at issue.

He said this suggested some form of agreement among defendants would have been needed to render the enterprises profitable.

The case is Starr et al v. Sony BMG Music Entertainment et al, U.S. Second Circuit Court of Appeals, No. 08-5637.

(Reporting by Jonathan Stempel; Editing by Derek Caney)