Reports: Justice Department Looking at iTunes

apples itunes contest rewards 10k in music for 10 billionth download

Reports citing unnamed sources say that the U.S. Department of Justice is considering launching an inquiry into the business practices surrounding Apple‘s iTunes music store. The issue apparently centers on Apple allegedly pressuring music labels to back out of an “MP3 Daily Deal” promotion from rival online music retailer Amazon.com.

Reports appeared in The New York Times, The Wall Street Journal (subscription required), CNET, and other outlets. According to the coverage the DOJ’s actions are currently informal and may not lead to a full-blown inquiry.

Amazon.com had been running the “MP3 Daily Deal” promotion since June 2008, withe the goal of luring music buyers into its own online music store. According to industry reports, Amazon.com initially set up the promotion as an in-house effort without any input from the music labels, but eventually Amazon and some music labels began working out deals where Amazon.com’s Daily Deal promotions would have windows of exclusivity on the tracks before they launched to the larger digital music market—thus boosting first week sales—including digital marketing support from the labels. Apple’s response to these deals has allegedly been to pull marketing support for tracks promoted as Amazon.com Daily Deals. The result is that some music labels are apparently avoiding Amazon.com Daily Deals for fear of angering Apple.

Unlike the personal computer and mobile phone markets, where Apple maintains a distinctly minority share, Apple’s iTunes music store is the United States’ largest music retailer, surpassing brick-and-mortar music retailers like Best Buy and Wal-mart several years ago and accounting for about 70 percent of the digital music market (according to recent figures from NPD).

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