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Apple's New Music Streaming Service Under Antitrust Scrutiny

Apple announced its new music streaming service during the Worldwide Developers Conference earlier this month in San Francisco. i

Apple announced its new music streaming service during the Worldwide Developers Conference earlier this month in San Francisco. Justin Sullivan/Getty Images hide caption

toggle caption Justin Sullivan/Getty Images
Apple announced its new music streaming service during the Worldwide Developers Conference earlier this month in San Francisco.

Apple announced its new music streaming service during the Worldwide Developers Conference earlier this month in San Francisco.

Justin Sullivan/Getty Images

The same day that Apple did a splashy, star-studded introduction to its new Apple Music subscription streaming service, New York's attorney general posted a letter from attorneys for Universal Music Group indicating that prosecutors are looking at the streaming music business and that Apple is one of the companies being investigated.

The letter, from a law firm representing Universal, was addressed to the antitrust bureau of the attorney general's office. It stated that Universal currently has no deals with Apple or companies such as Sony Music that would "impede the availability of free or ad-supported music streaming services, or ... limit, restrict, or prevent UMG from licensing its recorded music repertoire to any music streaming service."

The letter did not specifically say Apple was among the targets of the investigation. But Universal's attorneys did say the company was not colluding with Apple or its two major rival labels, Sony Music Entertainment and Warner Music Group.

A spokesperson for New York Attorney General Eric Schneiderman had this response:

"This letter is part of an ongoing investigation of the music streaming business, an industry in which competition has recently led to new and different ways for consumers to listen to music. To preserve these benefits, it's important to ensure that the market continues to develop free from collusion and other anti-competitive practices."

The investigation centers on whether Apple may have urged the labels to drop support for free, ad-supported streaming services such as Spotify and Google's YouTube. Such a move could be seen as anti-competitive.

Albert Foer, the founder of the American Antitrust Institute, says the current investigation may have been sparked in part by Apple's history. The company was found guilty last year of conspiring with book publishers to raise the price of e-books when it launched its online book store. Among those who brought the charges were 33 state attorneys general, including Schneiderman.

There are some parallels between the music industry and the publishing business. At the time Apple entered into the e-book market, publishers were upset by the prices Amazon was forcing on them. Apple had a business model that let publishers set the prices higher. In the case of music, the labels have been unhappy with the money paid out by free, ad-supported services. Most famously, Taylor Swift withheld her latest music from Spotify over the issue.

"The suspicion would be of the corporate culture and how they operate," Foer says about why the attorney general would investigate Apple Music. "It's just that investigators will have suspicions in some cases because of what happened in the past." But he says the investigation could also have been triggered by complaints from someone inside the music industry.

Chris Castle, a music industry attorney, finds it hard to believe that Apple would follow the same road that made it the target of an investigation that resulted in a $450 million settlement, along with supervision by an antitrust monitor. "The idea that these guys would blindly walk into this is crazy," says Castle. "It just doesn't seem plausible."

In fact, Connecticut State Attorney General George Jepsen, who is also focused on music streaming, told Reuters that his office was satisfied that Universal did not have anti-competitive agreements to withhold music titles from free services. However, Jepsen did not say he'd stopped investigating Apple. And European Union officials are also investigating Apple Music.

But Castle says he will be surprised if this goes anywhere. Apple, he notes, has a lot of competition in the streaming music space: Spotify, YouTube, GooglePlay, Amazon. "There are inquiries all the time" he says. "They ask a few questions. You send a response and that's it."

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