US Launches Antitrust Probe Into Apple’s iTunes

Well, this was as inevitable as the tides rolling in. The New York Times is reporting that the US Department of Justice is investigating Apple’s tactics in the digital music market. The antitrust probe is still in an early phase, and is said to focus on “the dynamics of selling music online”.

The issue that seems to have triggered the investigation is the one where Apple is said to have pressured record labels into not making any deals with Amazon’s online music store. Amazon asked record labels to allow them to sell some material a day ahead of general availability, and in turn, Amazon would promote these songs on its website in what it called “MP3 Daily Deals”.

Apple wasn’t particularly happy about this. Representatives of Apple’s iTunes Music Store asked record labels not to participate in Amazon’s marketing scheme, or else Apple would cease marketing those songs in the iTunes Music Store.

This would all be innocent corporate competition, were it not for the fact that Apple has a monopoly in digital music sales in the United States, which means they have to play by different rules – similar to Microsoft with Office and Windows. The NPD Group states that the iTunes Music Store has a market share of 69%, with Amazon’s shop being a distant second with a mere 8% market share. If you look at music sales overall (including the right kind of sales, i.e., CDs), iTunes’ share is 26.7%.

“Certainly if the Justice Department is getting involved, it raises the possibility of potential serious problems down the road for Apple,” Daniel L. Brown, an antitrust lawyer at Sheppard Mullin Richter & Hampton, told The New York Times, “Without knowing what acts or practices they are targeting, it’s difficult to say exactly how big a problem this is, but it’s probably something Apple is already concerned about.”

A comment over at AppleInsider really nailed how I feel about this one. “Apple simply has to live with the fact that bigness – and they are now humongous in many segments – brings with it scrutiny that we (as Apple consumers and shareholders) are not used to. Indeed, scrutiny that Apple is not used to,” writes AI reader anantksundaram, “The company has to learn to live with it, and watch its every step, its every action, its every statement. It has to start second-guessing itself constantly. That is the new reality.”

Just as in the Google WiFi collecting case we discussed last weekend, there is no harm in keeping close tabs on large companies like Apple and Google. Intended or no, actions by companies of this size can do serious damage to the marketplace (and thus, consumers), and in the end, consumers’ interests should always be placed above those of companies.


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