The Justice Department (DoJ) has begun an investigation into possible anti-competitive aspects of the majors’ online subscription services, MusicNet and Pressplay, as part of a deeper probe into industry practices, Billboard Bulletin reports.
The investigation into MusicNet and Pressplay began after the DoJ received complaints from small companies alleging that the partners in the proposed services plan to cross-license only themselves and other leading players. Investigators from the Federal Trade Commission and DoJ, which now has jurisdiction of the probe, have interviewed Webcasters and retailers and have notified the majors that they intend to examine possible anti-competitive aspects of MusicNet — a partnership between RealNetworks, AOL-Time Warner, Bertelsmann AG, and EMI Music Group — and Pressplay — the service built by Universal Music Group and Sony Music Entertainment.
The DoJ reportedly received complaints from small online music services, which claimed to have been refused licenses by MusicNet because they did not pony up hundreds of thousands of dollars for negotiations. A DoJ spokesperson says the agency does not comment on ongoing investigations. MusicNet and Pressplay declined to comment.
The investigation follows a probe by European regulators in June, after independent music producers complained that MusicNet and Pressplay could potentially exclude them from online distribution deals.
Meanwhile, industry sources who have been interviewed by DoJ investigators say the probe focuses more broadly on record companies’ recent litigation against Webcasters and other music services. The sources say the probe is examining whether record companies are using the litigation to gain dominance, with possibly collusive elements.
Last week, two House lawmakers, including Rep. Chris Cannon (R-Utah), introduced the Music Online Competition Act, which they say would rewrite music licensing and copyright laws to promote competition among online distributors and make it easier to buy and sell digital songs. A Cannon spokesman says the bill “addresses each of the allegations in the DoJ investigation.” The House Judiciary Committee also plans to hold a hearing this year on possible industry antitrust practices.