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Two states looking at Apple for anti-trust violations

New York and Connecticut are investigating if Apple colluded with labels over freemium services

Financial trends and news by Steven Loeb
June 10, 2015
Short URL: http://vator.tv/n/3e25

This was supposed to be the big week for Apple Music, which finally, after much anticipation, finally debuted on Monday. 

All is not well, though, and now it has come to light that at least two states are taking some anti-trust allegations against the company pretty seriously.

The attorneys general for the states of New York and Connecticut are both investigating claims that the company attempted to collude with music labels and artists to get them to take their music off freemium” services, including Spotify, according to a report from the New York Times on Tuesday. 

Apple is being accused of approaching more than a dozen artists in the music industry including for limited exclusive rights to music and partnerships to help bolster Beats. One of those artists was Florence and the Machine. 

The idea was for Apple to try to leverage its position in the industry in order to get the music labels to force streaming services that offered a free tier to abandon that idea. Spotify, which offers such a service, is a huge threat to Apple being able to compete; earlier this year Spotify revealed that it now has 60 million active users

It should be noted that Apple Music, which costs $9.99 a month, offers no freemium service.

These allegations were first brought up by the Federal Trade Commission in May. 

At least one major music label is already cooperating in the investigation. In a letter sent to  Eric Schneiderman, the attorney general of New York, and George Jepsen, the attorney general of Connecticut, legal firm Hunton & Williams, writing on behalf of Universal Music Group, denied that any deals had been struck by its client and Apple, nor with any other music labels, to get in the way of licensing music for ad-supported services.

"UMG does not currently have any agreements with Sony Music Entertainment or Warner Music Group (i) to impede the availability of free or ad-supported music streaming services, or (ii) that limit, restrict, or prevent UMG from licensing its recorded music repertoire to any music streaming service on any terms that UMG may choose. Nor does UMG intend to enter into any such agreements," it said in the letter.

"Similarly, UMG does not currently have any agreements with Apple Inc. (i) to impede the availability of third-party free or ad-supported music streaming services, or (ii) that limit, restrict, or prevent UMG from licensing its recorded music repertoire to any thirdparty music streaming service on any terms that UMG may choose. Nor does UMG intend to enter into any such agreements."

Despite Universal's denial, the two states will be continuing their investigation.

It’s important to ensure that the market continues to develop free from collusion and other anticompetitive practices,” a spokesperson for Schneiderman told the New York Times.

We will continue to monitor that market to ensure that consumers and competition are protected," Jepsen said in a statement.

Both Schneiderman and Jepsen have experience in going after Apple, as they were both involved in prosecuting the company for similar activity in regards to the e-books industry a few years ago. 

After becoming unhappy with the $9.99 price point that Amazon had set across the board for all e-books, regardless of the amount of effort put into creating them, five of the major publishers, Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster, colluded with Apple to put pressure on Amazon to raise the price.

Apple and heads of the five publishers regularly sat down to private dinners together, where they discussed plans to make Amazon change their prices. Apple was found guilty and, as a result, Apple’s iBookstore began to give publishers an alternative distribution to the Kindle store. 

VatorNews has reached out to Apple for statement or comment on the report. We will update this story if we learn more. 

(Image source: apple.com)


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