An antitrust inquiry has been reportedly launched by the United States Department of Justice with respect to Apple’s music sales tactics, as some unnamed sources claim. It seems investigators have begun to question some major Internet companies and music labels in the music industry trying to determine if Apple is abusing its dominant position on the market. The investigation is still in its early stages with conversations revolving around the dynamics of the on-line music sales.

Issues

The inquiry is particularly considering claims that Apple would have pressured music labels in relation to their participation in the “Daily Deal” program of Amazon in the MP3 download store. Anonymous executives belonging to the music industry have told Billboard that Apple was not agreeing that music labels were promoting their productions on both Amazon and iTunes. Representatives from iTunes allegedly began menacing to withdraw their marketing support for some releases that were featured as “Daily Deals”, if those music labels continued to participate in Amazon’s promotion.

This seems to be a replay of an earlier 2006 investigation into a possible price fixing for the digital music industry, which was dominated by Apple through its iTunes Store.

Analysis

The report takes notice of the dominant position Apple has in the US digital download market, where the company holds 69 percent of the market share. Although Apple sells music in a format that is DRM-free (Digital Rights Management) and broadly used, which prevents in a way lock-in, its early position hold in sales of per-track music as well as its sheer advantage as the leading seller of MP3 player makes it costly for any music label losing Apple’s attention with respect to a major release or avoiding the store altogether.

Apple also leads in the overall US music sales, where it holds 26.7 percent of the whole market, which means the double of its nearest competitor!

Apple has been on the first place amongst top music retailers in the United States since early 2008. This is the reason why the Department of Justice has permanently kept an eye on the selling tactics the company was using. Apple, on its side, has never rested on its laurels, an example being its behaviour towards Amazon, which is a quite small competitor if we compare the two companies. The recent inquiry is indicating that the Department of Justice sees the on-line retail giant as a growing menace for a fair trading atmosphere. If the DoJ considers Apple’s commercial behaviour to be inadequate, the company could find itself to be in big trouble and punitive measures would be taken against them!

The new inquiry initiated by the Department of Justice follows a number of other incidents involving both Apple and regulatory authorities. Last year, the Department of Justice began studying an informal agreement that Apple and Google have concluded in order to not steal each other’s employees. Recently, Apple has been the subject of an inquiry requested by Adobe. It is related to Apple’s banning of Flash-to-iPhone compilers. A Federal Trade Commission’s additional scrutiny was requested over Apple’s recently announced iAd advertising system for mobiles.