#WWDC 2015 Apple News

Apple Music Under Scrutiny in NY and Connecticut Over Collusion In Deals With Music Labels

It has just been over a day since Apple launched its ambitious music streamer Apple music, and it is already in trouble. A NYT report says that Apple Music has come under the investigation by Attorney Generals in New York and Connecticut for possible collusion in deals with music companies to gain an unfair advantage over its rivals such as Spotify.

This news, first reported by NY Times broke out after Universal Music Group confirmed its participation in an ongoing inquiry into the unfair practices in music industry to benefit various music streaming services, in a letter sent to New York attorney general Eric T. Schneiderman on Tuesday.

UMG shares the Attorneys General’s commitment to a robust and competitive market for music streaming services in the mutual best interest of consumers, artists, service and content companies alike – and we have a long track record to that effect,

the letter reads.

We are pleased to have provided the Attorneys General information demonstrating that conduct. It is our understanding that, given these representations, the Attorneys General have no present intention to make further inquiries of UMG in this regard.

The letter though does not specifically mention Apple as the target of investigation and denies any wrongdoing on the part of Universal saying that the label has not entered into agreements with Apple, Sony Music or Warner Music that would hinder existing free-to-stream services.

This letter is part of an investigation of the music streaming business, an industry in which competition has recently led to new and different ways for consumers to listen to music,” 

said Matt Mittenthal, a spokesman for Eric Schneiderman, the New York attorney-general.

To preserve these benefits, it’s important to ensure that the market continues to develop free from collusion and other anti-competitive practices.

This investigation follows a similar probe by Europe Commission into Apple’s dealings with record labels. The Attorney generals are reportedly investigating if Apple has indulged into unfair means to pressurize music companies to drop their support for the free, advertising-supported listening model offered by Spotify and Google’s YouTube. Currently Spotify and similar streaming services offer listeners free songs in return of viewing certain advertisements.

Apple, on the other hand, does not support such ad-supported listening in its latest music service which costs $9.99 for a single user or $14.99 for a family with up to six members. This is seen as a potential anticompetitive conduct by the attorneys who are also looking into whether Apple has been using its position as the largest music retailer to put rival music services, such as Spotify, at a disadvantage.

Connecticut Attorney General George Jepsen said in an e-mailed statement to Reuters,

We have been working with New York to investigate concerns about potential anticompetitive conduct in the music streaming industry. At this point, we are satisfied that Universal does not have in place -– or in process –- anticompetitive agreements to withhold music titles from no-charge streaming services

Apple as usual has declined to comment on the issue but its efforts to gain an upper hand into music streaming industry is no secret. Moreover, it won’t be a surprise considering its position as the largest music retailer which it reached by offering individual songs for sale via iTunes. However, a MusicWatch report predicts music-streaming revenue to exceed sales from downloads next year. This trend is one of the obvious causes of Apple Music’s 100 country launch.

As for this present scrutiny, it isn’t the first time Apple has been accused of such collusion practices. For example, in 2013, it was sued along with five of the biggest U.S. book publishers, for conspiring to raise the prices of e-books. Interestingly, at that time also, both Schneiderman and Connecticut’s Attorney General George Jepsen were among a group of attorneys general in 33 states and private plaintiffs who sued the Cupertino giant.

Apple was eventually found guilty and had to pay $450 million after a federal judge ruled that the company had violated anti-trust laws, most of it to e-book consumers, as part of a settlement.


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