Apple Under Scrutiny On Antitrust Allegations

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A week ago, we wrote about the most exciting thing coming out of Apple’s (NASDAQ:AAPL) recent WWDC 2015 — Apple Music. As a direct attack on Spotify, Apple Music is the company’s attempt to get caught up again in the music streaming industry it created.

But not too long after the announcement, the Attorneys General of New York and Connecticut began investigating whether Apple colluded with the music industry to hamper competition among other music streaming service companies.

"This letter is part of an ongoing 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 New York Attorney General Eric Schneiderman, in a statement.

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

Deja vu?

The lawsuit, which was filed on the same day as the service was announced, hearkens back a couple years to 2013, when attorneys general in 33 different states and several private plaintiffs sued Apple and five of the largest U.S. book publishers for colluding to raise e-book prices.

In that suit, Apple agreed to pay a $450 million settlement after a federal judge agreed to the antitrust allegations. Could this be the same story?

In this case, it seems that competitors are complaining. "If Apple is doing independent agreements, that’s fine. There’s nothing illegal with Apple coming out with a paid subscription service," said Andre Barlow, a Washington-based attorney who formerly worked on antitrust cases at the Justice Department. "These preliminary investigations are likely the result of competitors’ complaints."

One record label ruled out

The idea behind the suit is that Apple is conspiring with the music industry to enter an anticompetitive agreement that would require labels to withhold music from free streaming services like Spotify and Pandora.

Possibly in anticipation of an investigation, Universal Music Group wrote a letter to the Antitrust Bureau of the attorney general’s office, saying it had no dealings with Apple or other companies such as Sony Music that would “impede the availability of free or ad-supported services or prevent it from licensing its recorded music to any music streaming service.”

Say it ain’t so

So what do we think about it? In all honesty, collusion seems unlikely. Given the fact that Apple is still in appeals for certain parts of the e-book trial, it wouldn’t make any sense for either Apple or the record labels to even think about trying to do it again in the music industry. As for abuse of power, Apple simply isn’t as powerful as it once was in the music industry. When it comes to music streaming, the market is crowded. Apple will be just another provider alongside companies like Spotify, Rdio, Pandora, Rhapsody SoundCloud, YouTube and Tidal.

Does Apple have more influence than those companies? Absolutely. But that doesn’t mean it necessarily has enough influence to make it worth it for record labels to snub the others in favor of Apple. While investors may be on pins and needles until this is over, they can rest assured that it likely won’t turn out like the last one.