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Did Apple use its online music monopoly to prevent much smaller competitor Amazon from landing music deals? The U.S. Department of Justice is investigating.  (Source: Dave's Whiteboard)
Apple's anti-Amazon moves may cost it some big fines

When it comes to the digital music sales market, services like Amazon or Zune Pass have made a minor splash, but Apple has long dominated the market.  Over the last two decades, antitrust regulators in the U.S. and Europe have imposed fines and restrictions on Microsoft and Intel to try to prevent them from abusing their dominant position in several markets.  However, they have cast a largely blind eye on Apple's iTunes -- until now.

Antitrust investigators with the U.S. Department of Justice are conducting an extensive inquiry into Apple's online music business, interviewing Apple employees, internet music company employees, and music label employees according to the
New York Times.  At the core of the investigation is the allegation that Apple applied pressure to force music labels not to grant Amazon.com access to exclusive tracks to help grow the online retailer's fledgling music market.

A previous investigation was conducted several years back in the European Union, examining Apple's iTunes pricing practices.  The investigation's conclusions were highly critical of Apple, but did not levy any fines -- unlike recent EU investigations into Microsoft and Intel.

In March, it was reported in 
Billboard magazine that Amazon.com would be getting certain songs a day before they were widely released.  It would put these songs in a special promotional section dubbed "MP3 Daily Deal."  According to the article, Apple hated the idea and threatened music labels that participated.  Specifically, it vowed not to sell the songs featured in the promotion on iTunes -- a much bigger marketplace.

ITunes reportedly owns 69 percent of the online music market, according to the NPD group. The next closest competitor in the online market is Amazon, which holds an 8 percent share. The remaining 23 percent are split up among smaller players.

In 2007 Apple had a mere 12 percent of the total music market (both online and offline), but it recently became the largest single seller of music in the world, with 26.7 percent of the overall market.

Daniel L. Brown, an antitrust lawyer at Sheppard Mullin Richter & Hampton states, "Certainly if the Justice Department is getting involved, it raises the possibility of potential serious problems down the road for Apple.  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."

Apple now has dominant positions in several markets -- tablet computing (iPad), portable music players (iPod), smart phone applications (iTunes App Store), and online music (iTunes Music Store).  Thus it has leverage to use its position to damage competitors, if it should so choose.

The new investigation is at least the fourth antitrust inquiry into Apple.  The U.S. government is also investigating Apple, Palm and others to see whether the companies illegally agreed not poach each others' employees (Apple's CEO Steven P. Jobs secretly suggested such a truce, which appears to be illegal).  The government is also investigating Apple's ban on Flash for the iPhone or iPad and its decision to block out ports of Flash titles to native iPhone code.  And there's also a pending investigation about whether board members serving on both Apple's and Google's boards violated antitrust laws.

ITunes first launched in 2001 and has long been on the forefront of the push for legal online music downloads.  Apple has sold over 10 billion tracks on iTunes to date, and has become one of the biggest revenue sources for the struggling music industry.  Apple also has supported a number of smaller independent artists by promoting them and giving them tools to expose their work to a broader audience.  Apple also has recently made some steps to increase competition, such as allowing streaming music services such as Pandora and Rhapsody onto Apple devices.

Spokespeople for Apple and Amazon would not comment on the inquiry.  Gina Talamona, a deputy director at the Justice Department, also had no comment.



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wow
By Etern205 on 5/26/2010 9:57:19 AM , Rating: 5
looks like Apple's reign has finally started to crumble...




RE: wow
By Smilin on 5/26/10, Rating: -1
RE: wow
By Pirks on 5/26/2010 10:23:23 AM , Rating: 5
Now where's my dam' "iTunes or alternatives" installation ballot huh???


RE: wow
By JasonMick (blog) on 5/26/2010 10:29:12 AM , Rating: 5
quote:
Just like Microsoft did a decade ago. Oh wait...that's right they never did crumble.

Ok how about this: Looks like people are finally *saying* Apple will crumble (just like Microsoft).

That's better.


Jokes aside, I'm not sure either of you really understand the government's actions here.

The goal with Microsoft, Intel, and now Apple was never to kill them or "make them crumble". Rather it's to prevent them from abusing their position. Most industrialized nations have no laws preventing a monopoly. Rather they have laws preventing a company from abusing its monopolistic position.

While fines levied against Intel and Microsoft by the U.S. DOJ and EU's EC seem massive, they're just a drop in the bucket compared to these companies quarterly revenue (maybe something like 1/30 of the year's revenue). However, they're large enough to make the companies think twice about trying to kill the competition.

The merits of such laws are certainly open to debate, but they seem to have been at least mildly successful with regards to Intel and Microsoft in the U.S. and EU. Microsoft now is much more open in letting software competitors design products that can FULLY exploit its systems' capabilities (e.g. Open Office 3, Google Docs, Firefox, etc.). And Intel has reportedly stopped trying to pressure retailers to ban AMD products in return for discounts. In both cases the companies maintained their dominant position, for the most part, but consumers gained access to new products, should they want them.

Hopefully the same kinds of benefits will result from the Apple antitrust inquiries.

I know anti-Apple fervor is high right now and many would love to see Apple "crumble" but that is absolutely NOT the government's role. That should be up to the free market to decide. Fortunately, the government has no intentions to take on such a role.


RE: wow
By Reclaimer77 on 5/26/10, Rating: -1
RE: wow
By JasonMick (blog) on 5/26/2010 1:30:22 PM , Rating: 5
quote:
We've already seen the outright government takeover of GM. So how you can sit there and say they have no intentions of getting involved in businesses and deciding their fate is foolishness.


The takeover of GM has very little to do with government antitrust regulation (other than perhaps some vast liberal conspiracy in your mind). Besides if your point was that the government was destroying companies, you accidentally provided evidence to the contrary -- the government artificially SAVED GM from complete liquidation of all assets due to lack of a bank that could underwrite the bankruptcy process.

quote:
Well actually they are probably going to pass sweeping "financial reform" which, with ZERO oversight, the government can take over any business it sees fit for any reason.


I meant the government as a whole. Sure there are radical left voices (Patty Murray, Jack Reed) that might advocate mild socialism. However, there's equally radical right voices (the soon to be elected Rand Paul, for example) to balance that out by advocating ZERO regulation and letting abusive monopolies do whatever they want.

The radicals on both ends make a lot of noise, but thus far the result has generally been yes, there is government regulation of monopolies to prevent abuse, but no the government isn't destroying companies.


RE: wow
By Reclaimer77 on 5/26/2010 2:09:48 PM , Rating: 2
My mistake. I was making a broader point than JUST anti-trust. I see how off key my post must have looked now.


RE: wow
By sbtech on 5/27/2010 5:43:18 AM , Rating: 2
Jason rounded up the points very well. I just want to stress on one aspect in perticular, as every time there is a debate on this issue, people keep posting "but they are not monopoly", and so on. The regulation is:

The Monopolies And Restrictive Trade Practices Act.

Further reading:

http://vakilno1.com/bareacts/mrtpact/mrtpact.htm


RE: wow
By akugami on 5/26/2010 10:20:16 AM , Rating: 2
Just like every other music publisher or retailer that has been slapped on the hands by the government right? I mean, we can criticize Apple in other industries for their practices but when dealing with the music industry, this is almost par for the course. The music industry has been hit with price fixing charges over the years. In fact, there's a lawsuit going on right now alleging collusion and price fixing on digital music sales.


RE: wow
By Gyres01 on 5/26/2010 10:51:49 AM , Rating: 2
Agreed...I stopped using I tunes 2 years ago...Thanks Rhapsody to go.


RE: wow
By rs1 on 5/26/2010 1:19:48 PM , Rating: 5
It's about time. I've always wondered how Apple was able to get away with essentially forcing people to use iTunes when Microsoft was fined billions of dollars just for making IE the default browser in Windows. Apple's actions seem more detrimental than Microsoft's, both to the consumer (iTunes is an all-around crappy piece of software) and to its competitors (IE was trivial to replace, compared to iTunes). Microsoft was at least nice enough to build hooks into its OS that made it easy to use with a different web browser, while Apple has done no such thing with the iPod and iTunes.

I hope someone finally throws the book at them.


RE: wow
By Tony Swash on 5/26/10, Rating: -1
RE: wow
By rs1 on 5/26/2010 3:41:21 PM , Rating: 5
quote:
Apple doesn't have a monopoly in the music business


That depends upon how you define "music business". Your definition would seem to be so broad that nobody can possibly have a monopoly in it. It's kind of like saying "but Microsoft doesn't have a monopoly in the electronics business" a decade ago. However, Apple absolutely does have a monopoly in the portable music player business, and also in the online music sales business. And forcing consumers into using iTunes is how they use that first monopoly to reinforce the second.

But that's besides the point. If something is considered wrong/anti-competitive when you have a monopoly, then it is no less wrong (from a moral perspective) when you don't have a monopoly. Lack of monopoly status may be an effective legal argument, but it doesn't provide a valid ethical excuse for using anti-competitive and/or consumer-unfriendly tactics. At least, not in my eyes it doesn't.

quote:
anybody can put any content they want on their iPods as long as it is in an open format


This is false. The only "supported" way to sync content with an iPod is to use iTunes. The fact that any unprotected content can be added through iTunes is moot. Users should not be forced to go through iTunes just to get music onto their iPod.

Granted, some third-party utilities exist that make it easier to bypass iTunes, but technically Apple disallows their use. And besides, there shouldn't be a need for any sort of transfer utility in the first place. The iPod connects over USB, it stores its music files in a standard format file system, and every modern Operating System in existence supports USB file transfer natively. There's no reason for Apple to not allow simple drag and drop file management on the iPod, except that they want to force people to use their software, which is tied directly to their online music store.


RE: wow
By sprockkets on 5/26/2010 5:58:14 PM , Rating: 2
quote:
Users should not be forced to go through iTunes just to get music onto their iPod. Granted, some third-party utilities exist that make it easier to bypass iTunes, but technically Apple disallows their use. And besides, there shouldn't be a need for any sort of transfer utility in the first place. The iPod connects over USB, it stores its music files in a standard format file system, and every modern Operating System in existence supports USB file transfer natively. There's no reason for Apple to not allow simple drag and drop file management on the iPod, except that they want to force people to use their software, which is tied directly to their online music store.


You do know that most if not all ipod users have no clue on how to do what you just mentioned, and that making folders and copying files over is very, very clumsy.

iTunes makes it easy to extract, buy and organize music, tag them with album art, then puts it on the device with all the info needed to work. Either itunes makes the database or, as with Cowon's D2 for example, it does It is a.nice device with lots of features I need, but is horrible at managing the database without corrupting itself. In tag mode, it needs mp3 files to be tagged with no leading zeros to work correctly, and ogg files to have leading zeros. It only took many hours of trial and error to figure it out.


RE: wow
By afkrotch on 5/26/2010 9:09:28 PM , Rating: 3
quote:
You do know that most if not all ipod users have no clue on how to do what you just mentioned, and that making folders and copying files over is very, very clumsy.


My mp3 player is drag and drop and it doesn't require any kind of folder making. It sorts music through the tag information. Which has the crap imbedded into it, when you purchase it online. If you rip it off your CD, those programs automatically connect to the CDDB to pull all that information to tag your music.

Also, if users have no clue what they're doing, why are external hdds becoming so popular? You think every hdd comes with an iTunes like software? USB keys?
Sorry, but ppl don't need iTunes to throw music on their mp3 players.


RE: wow
By sprockkets on 5/26/2010 10:15:10 PM , Rating: 2
quote:
It sorts music through the tag information. Which has the crap imbedded into it, when you purchase it online.


Yes, but the ipod requires itunes on the desktop to interpret and build the database so it can sort them in its own way. Cowon's D2 doesn't need this. It also took them 10 firmware updates to get it to not ruin the database.

quote:
If you rip it off your CD, those programs automatically connect to the CDDB to pull all that information to tag your music.


So does itunes. And instead of one program to rip, one to move over, it does both. Keeping it simple for simpletons.

quote:
Also, if users have no clue what they're doing, why are external hdds becoming so popular? You think every hdd comes with an iTunes like software? USB keys? Sorry, but ppl don't need iTunes to throw music on their mp3 players.


Maybe you don't need itunes, but they do. These are people who don't even understand the concepts of files and folders.

I know it is hard for you to understand, but there are people out there who don't get computers, and for them, playing music meant putting a needle on a record or putting a cassette in the player and nothing else.

For those people, time and time again, they will find it within their power to use itunes vs. drag and drop. We are talking here about people who, after me explaining to them 10 times where their podcasts are, still don't get it. They also finds the thumbwheel much easier to use than say, Cowon's D2's touchscreen interface.

Choice and freedom mean nothing to these people if they can't figure out how to use their music players.


RE: wow
By rs1 on 5/26/2010 11:52:05 PM , Rating: 5
quote:
Choice and freedom mean nothing to these people if they can't figure out how to use their music players.


But it's not an either-or situation. Apple could continue to support syncing content to the iPod through iTunes, while AT THE SAME TIME supporting basic drag-and-drop file management for users who would rather not use iTunes.

It is possible for Apple to offer users more freedom, without simultaneously abandoning their proprietary solution. Similar to how Microsoft still supports Internet Explorer. They have made it easier for users to choose a different browser, while at the same time continuing to provide their own offering.

That's all I'm saying Apple should do. Users who like iTunes and want to continue using it are welcome to do so, but users who don't like iTunes deserve a viable alternative that doesn't require jumping through hoops to make work.


RE: wow
By sprockkets on 5/27/2010 12:01:51 AM , Rating: 2
quote:
But it's not an either-or situation. Apple could continue to support syncing content to the iPod through iTunes, while AT THE SAME TIME supporting basic drag-and-drop file management for users who would rather not use iTunes.


I agree to that, but that's what happens when you struck deals with the RIAA labels, and while the DRM is gone, they don't make it easy to xfer music off the ipod or sync to multiple profiles (not that syncing to multiple computers ever worked correctly for PDAs anyhow).

I'll take an Android phone over an iphone anyday, and my current phone still does things that Android JUST got as features, like BT file xfers. For those simpletons, choice isn't a feature; it confuses them.


RE: wow
By afkrotch on 5/27/2010 1:18:36 AM , Rating: 2
quote:
Yes, but the ipod requires itunes on the desktop to interpret and build the database so it can sort them in its own way. Cowon's D2 doesn't need this. It also took them 10 firmware updates to get it to not ruin the database.


I wasn't talking about an iPod. I was talking about my Zen X-Fi2. Doesn't require anything to move music over to my mp3 player. Now, if you wanted to, you can use the Creative Centrale to move music and sort it out, if you felt like it.

quote:
So does itunes. And instead of one program to rip, one to move over, it does both. Keeping it simple for simpletons.


I only use CDex to rip. From there, drag and drop.

quote:
Maybe you don't need itunes, but they do. These are people who don't even understand the concepts of files and folders.

I know it is hard for you to understand, but there are people out there who don't get computers, and for them, playing music meant putting a needle on a record or putting a cassette in the player and nothing else.

For those people, time and time again, they will find it within their power to use itunes vs. drag and drop. We are talking here about people who, after me explaining to them 10 times where their podcasts are, still don't get it. They also finds the thumbwheel much easier to use than say, Cowon's D2's touchscreen interface.

Choice and freedom mean nothing to these people if they can't figure out how to use their music players.


There will always be stupid ppl out there, but majority rule, when it comes to electronics. So far, seems everyone knows how to use an external hdd. Which is pretty much what your mp3 player is. The only difference. That external hdd happens to have a screen and play music.


RE: wow
By Tony Swash on 5/26/10, Rating: -1
RE: wow
By leuNam on 5/27/2010 9:25:01 AM , Rating: 2
yep hearing your reply....sheesh, delusional really...

business model - monopoly...

Big, as a business model (let alone as an expression of the national mood), seems bound for obsolescence.


RE: wow
By MrPoletski on 5/27/2010 9:04:28 AM , Rating: 2
MMMMMMMMMMMMMMMMMM

Apple crumble......

Drools...


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