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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 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 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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Apple Competes
By gprovida on 5/31/2010 1:21:27 PM , Rating: 2
1. Apple offered iPod, iTunes Store, and iTunes app 2001-2003 that created the digital music industry and offered a competitive alternative to pirating. It was constrained by music industry to offer DRM, but got consumers tremendous rights (unparalleled at rhe time and not available since on other media).
2. A marching Army of competitors emerged and failed. Some are still around, but they failed in the market not by unfair competition. The music industry has tried to raise prices, restrict choices, and given competitors special pricing and access.
3. Apple has contained the price increases (and in the end avoided industry greed killing digital music, has struggled to allow streaming from cloud of bought music against industry pressure for new charges, was a major player in getting rid of music DRM, and guess what has NOT elected to promote (but will sell) music industry has chosen to promote in advance with Apple competitor (e,g., those small companies like Amazon, Walmart, and Microsoft),Duh!!!
4. Apple is struggling to open up video to new models, but video will need to get to a crisis like music did (and it will - look at plunging DVD sales) then a new model will emerge. Like music in 2001 video is controlled by cable and TV distributors as well as brick and mortar like Walmart. Eventually these old models will fail and whether Apple has a viable alt will be seen. But Apple offers a different model that industry is afraid will diminish their control.
5. If a I offered a 200000 app store for PCs and said it would be nearly 100% virus free, safe for your family, not have any conflicts ( think of the permutations of apps and 100,000,000 devices) that is be stable, let small and large developers compete at a fraction of the cost, much less pirating of software, stable consistent and easily upgradable platform and developer kit, bu you as a user and developer would need to abide by rules regarding privacy, authentication, content narrowing (no porn or compete with Apple core products) use authorized AND SUPPORTED APIs, and have to develop the code natively; then 2 years ago you would have said sure but no one can make it work. Oh by the way, there are a gazzilion copy kats and competing models business and products to choose from, then gee this sure sounds like a monopolist.
6. If I said no more 5 inch floppies, no more 3 inch floppies, no more ADB or PC connector, or ... a whole slew of technologies that were or should be sunset to bring you better products, then you might say loss of freedom, except you had a million alternatives that kept that old technology. Flash is proprietry (when Adobe wants to do something, then it gets done not when Apple releases iPad#2) so Apple is hostage (history has shown Adobe business reasons rarely align with Apple). Adobe has had 3 years to demonstrate a technology capability that really works on low power, touch based, and mobile devices (Flash light is a joke) and it's recent beta is buggy, CPU hog, and fails to be fully compatible with it's current desktop stuff. Gee, these sure are reasons to support Flash!

So good luck to Justice Dept, where they failed to manage illegal monopolies MS and INTEL (read the court decision on MS and learn what illegal means) taking on Apple who has been successful in existing very competitive markets (music, cellphone, and tablet) without violating the letter or spirit of the law. In addition, spends the least funds lobbeying congress for special treatment.

"It seems as though my state-funded math degree has failed me. Let the lashings commence." -- DailyTech Editor-in-Chief Kristopher Kubicki

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