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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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RE: Out of Buisness soon!
By troysavary on 5/26/2010 5:04:55 PM , Rating: 2
While Apple is not likely to go out of business any time soon, it's market cap is currently way over valued based on speculators driving up the price. They are taking advantage of the near constant free publicity Aplle gets from the media lately.

Microsoft is significantly ahead of Apple in revenues, profits, and revenue-per-share, so there is no way for Apple to maintain its unrealistically high stock prices. This is especially true as Apple is likley to have it's cash cow, the iPhone, lose market share to Android, and likly to WebOS as well, now that it has HP behid it. For that matter, Win Mobile 7 has potential too. Android and WinMo have the advantage of not being tied to one handset maker.


RE: Out of Buisness soon!
By Tony Swash on 5/26/10, Rating: -1
RE: Out of Buisness soon!
By troysavary on 5/27/2010 12:30:03 AM , Rating: 2
You did not address the fact that MS made more money than Aplle did during every quarter of those 10 years. By any reasonable analysis, based on that, MS shares are delivering more value to their shareholders. But the perceived "failure" of Vista, even though it is still way ahead of MacOS, just because of the constant bashing of Vista by Mac-friendly media outlets, has led to non-savy investors dumping MS stock.

Also, Office, a huge cash cow, is not as "sexy" as a new iPhone, and doesn't catch the consumer's eye as much. Share prices are often affected by people buying and selling for emotional reasons like that. But with the huge public emracing of Windows 7, coupled with the higher than expected MS earnings, I expect MS shares to climb. Meanwhile, now that the faithful have purchased their iPads, I am betting the sales to slow as the general public fails to see the point of the device. I strongly suspect the climb is over for Apple share prices soon and we will see a downward correction.


RE: Out of Buisness soon!
By afkrotch on 5/27/2010 1:55:39 AM , Rating: 2
Please tell me all about these string of stunningly successful products.

iPod - nothing was established
iTunes - nothing was established
iPhone - mostly Blackberry
iPad - nothing is established even to this day. Not even the iPad
Mac - has been established by PCs and is still established by PCs

So far, the only product from Apple to go into an established market and come out successful has been the iPhone. Everything else, nothing was established or they got nowhere in an established market.


RE: Out of Buisness soon!
By sebmel on 5/26/2010 8:28:26 PM , Rating: 2
Apple grew over 3000% in the last decade
Microsoft fell 50% in the same time

In that time Apple developed profitable businesses out of the iPod, iTunes, iPhone, iPad and the app stores.

In that time Microsoft lost over 10 billion dollars on the xBox... which has only recently started turning a profit and will perhaps take another decade to make it's first cent.

In the last 25 years Apple have bought just 25 companies... instead growing from within.
In the last 4 years Microsoft has bought 45.


RE: Out of Buisness soon!
By afkrotch on 5/27/2010 2:00:01 AM , Rating: 2
Xbox 360 went to black a single year after release. MS's EDD has been profiting for quite a long time now. I don't know who you're looking at for your information.


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