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You are here: Home / World Wide Web / Justice Probes Apple's iTunes Store
Antitrust Team Probes Apple's Music-Market Practices
Antitrust Team Probes Apple's Music-Market Practices
By Jennifer LeClaire / CRM Daily Like this on Facebook Tweet this Link thison Linkedin Link this on Google Plus
PUBLISHED:
MAY
26
2010
The Department of Justice is investigating Apple's practices in the digital music market, according to reports in The New York Times and The Wall Street Journal. Apple has not publicly commented on the formal examination.

The Times cited "people briefed on the conversations" in its report that revealed Justice staff members have talked to major music labels and Internet music companies. The antitrust inquiry, which is zeroing in on how Apple sells music online, is reportedly still in its infancy.

"Apple is hardly a monopoly in the music industry. There are plenty of places people can go to get their music," said Michael Gartenberg, a partner at Altimeter Group. "So the question is -- and what will be investigated -- is whether or not Apple in its position in the industry did something that ran afoul of the law."

Did Amazon Cry Foul?

One specific accusation against the iPod maker is that the company used its dominant market position to compel music labels to turn down requests from Amazon.com for exclusive rights to sell soon-to-be-released music.

Billboard magazine reported in March that Amazon was seeking first dibs on songs a day before their official release. Amazon planned to promote those songs as a MP3 Daily Deal on its web site. Billboard also reported that Apple penalized music labels that agreed to Amazon's terms by nixing marketing efforts for those songs on iTunes.

Did Amazon cry foul? Although Amazon is a force to be reckoned with in e-commerce, Apple remains the king of the hill in the online music category. According to NPD Group, Apple holds 69 percent of that market. Amazon is a far-and-away distant second with a mere eight percent market share.

"Apple is not the scrappy underdog anymore. It's a powerful force in the industry. You can't get to that position without making some enemies along the way," Gartenberg said. "No doubt, there are always going to be vanquished competitors and others looking to the courts to resolve what they couldn't do in the marketplace. That's where the investigation gets opened."

Sour Grapes?

It's unclear what music labels or online music stores may have filed complaints against Apple. However, news reports indicate Adobe Systems launched its own complaint against Apple and its guidelines for iPhone application developers. Apple refuses to allow developers to use Adobe's Flash technology for online video. Adobe is reportedly fighting back by complaining to the Federal Trade Commission.

Gartenberg doesn't think there is any connection between Adobe's reported complaints and the investigation into iTunes. But he does expect Apple to come under greater scrutiny than in the past.

"When you hit a certain level of success, it usually means that you've beaten others from a competitive standpoint, and many times some of those folks are going to try to use the courts to do what they couldn't do in the marketplace," Gartenberg said.

"Sometimes it's legitimate. There are companies that have become successful by means that are counter to our legal system," he said. "In other cases, it's simply competitors who are complaining because they were beaten."

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