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The U.S. Department of Justice is reportedly investigating Apple (Nasdaq: AAPL) over its efforts to maintain its dominance of the digital music market through its iTunes store.
DoJ investigators are said to be asking major music labels and Internet music companies about allegations that Apple had pressured some industry members to deny Amazon.com (Nasdaq: AMZN) from exclusive access to music prior to its general release, according to an article in The New York Times.
This follows allegations in the music industry trade magazine Billboard back in March regarding Apple's tactics.
Music, Music, Music
Around the middle of 2009, Amazon began asking music labels to provide its "Daily Deal" promotion with exclusive access to albums one day before they were released, according to Billboard.
Apparently, iTunes representatives began pressuring labels to decline participation in the promotion and withdrew marketing support for some releases featured in that Amazon program.
That apparently led executives at Capitol, Capitol Nashville and Jive Records to cancel plans for participation in "Daily Deal" promotions for upcoming albums.
Apple did not respond to requests for comment by press time, and Amazon spokesperson Craig Berman declined comment.
Being the 800-Pound Gorilla Isn't Always Easy
Apple's problems with the DoJ are partly the result of its market dominance -- according to the NPD Group, it has 70 percent of the digital music market.
"When somebody's a leader in the market who didn't use to be, the question of how they got there always arises," explained Carl Howe, director of anywhere research at the Yankee Group. "This routinely triggers an investigation."
It could also be that Apple's actions triggered the probe, assuming the allegations of its behavior are true.
"With 70 percent of the market, Apple is the powerhouse in digital music at the moment and has a surprisingly tight hold on the market, much tighter than Amazon had on books," Rob Enderle, principal analyst at the Enderle Group, pointed out.
"When you have any company with that kind of power -- Apple or Microsoft (Nasdaq: MSFT) or Standard Oil -- that company will try to misuse that power," Enderle told MacNewsWorld.
Fear and Loathing Among Competitors?
There's another possible explanation for the DoJ launching an investigation into Apple's practices in the music industry -- that competitors are trying to spike its forthcoming World Wide Developers Conference, to be held in San Francisco the week of June 7.
"The signal to noise ratio will get wacky because Apple's 10 days away from the WWDC," Michael McGuire, a vice president of research at Gartner (NYSE: IT), told MacNewsWorld.
Already, a complaint from Adobe (Nasdaq: ADBE) over Cupertino's new rules for application developers, which restrict them to using only a select list of development tools, reportedly the DoJ and the Federal Trade Commission discussing a possible probe of Apple.
Apple's competitors may be hoping that any publicity over other probes around the time the WWDC is launched may help affect the amount and nature of the media attention given to Apple.
Further, news of the probe may hurt Apple in the music industry.
"Apple has lots of things to potentially worry about from the standpoint of the music industry," Russ Crupnick, an analyst at the NPD Group, told MacNewsWorld. "The growth in digital download is slowing and needs to be energized; consumers are smitten with apps and thus distracted time-wise and financially; and there's a whole host of emerging options for listening to and streaming music."
You Gotta Prove It, Prove It
If the DoJ is indeed looking into Apple's practices in the music industry, these are only preliminary investigations, and they may, in the end, amount to nothing.
"Examining a situation is very different from launching a prosecution," the Yankee Group's Howe told MacNewsworld.
"The Department of Justice is trying to figure out first whether Apple's behavior is a problem, and second whether it's something the department can act upon," Howe pointed out. "You've got to pass the first two hurdles before a prosecution is launched."
