Sources: Subpoenas headed to Big Four.
The U.S. Department of Justice is piggybacking on New York State Attorney General Eliot Spitzer's investigation into online music pricing, Billboard has learned. Each of the four major labels have either been subpoenaed or are expecting subpoenas from the Department of Justice in the coming days.
Spokespersons for Warner Music Group, Sony BMG and Universal Music Group declined comment. “We have not yet received anything,” said a spokesperson for EMI.
Speaking on condition of anonymity, however, sources close to each of the four majors confirmed that the subpoenas were, at the least, expected. “The DOJ has phoned the labels to tell them it’s coming,” said one label source. “It is Department of Justice and it is digital pricing,” said another. “As best as we can tell, it’s identical to the Spitzer thing.”
Reports surfaced in January and February that Spitzer had subpoenaed the major labels, pushing his probe on radio promotion practices into digital music pricing.
Much of the early chatter in the industry surrounding the Spitzer investigation centered on the major labels' use of "most favored nation" clauses in deals with download and subscription retailers. Digital music service operators have complained that such clauses, which dictate that a label cannot receive pricing terms worse than its competition, are a tool for de facto collusion by the record companies. In some cases, the clause allows labels to audit the terms of deals the online retailers have with other record companies to ensure that they are receiving the best pricing terms possible, digital retail sources say. The probe is believed to be looking at whether anti-competitive practices are at play.
Spitzer's subpoenas began to circulate among digital retailers in late January and early February, as well, a source familiar with many of these companies told Billboard.
What, if anything, either the Department of Justice’s or Spitzer's look at digital music pricing will yield remains to be seen. A previous probe by the DOJ into digital music pricing in 2001 came up empty. After a two-year inquiry, the case was dropped, and no antitrust charges were filed.
As a public company, WMG will likely disclose the subpoena in the coming days.