WASHINGTON — The Justice Department opened an antitrust investigation of the online music business, focusing on two new joint ventures backed by five major record labels, Monday’s Wall Street Journal reported.
The probe, which is in a preliminary stage, is looking into possible anticompetitive problems posed by the joint ventures, lawyers close to the case said Friday. The government also is expected to examine the major record companies’ use of copyright rules and licensing practices to control online distribution of their music, these people said.
The rival joint ventures, pressplay and MusicNet, have said they will begin operating in the fall, and each is aligned with one of the two warring camps in the online world. Pressplay is working with Microsoft Corp. (MSFT) and is jointly owned by Sony Corp. (SNE) and Vivendi Universal SA (V). MusicNet is based on RealNetworks Inc. (RNWK) technology and is owned by AOL Time Warner Inc. (AOL), EMI Group PLC and Bertelsmann AG and RealNetworks.
The ventures are the music labels’ first big move into digital distribution, a technology that one day could reshape the industry. The labels have been criticized for moving slowly into online music and failing to license music to smaller competitors; they respond that they have been trying to work out how to protect — and be paid for — online music and to negotiate terms with music publishers.
Both joint ventures declined to comment, as did all five major record labels.
One lawyer familiar with the Justice Department investigation said that it isn’t unusual for joint ventures among competitors to attract antitrust scrutiny and that many such ventures have been permitted to continue operating.
MusicNet and pressplay are already under investigation by European antitrust enforcers, who began their inquiry in June. The U.S. probe is only the latest in a string of antitrust issues that have arisen in recent years as the music industry has consolidated.
Copyright (c) 2001 Dow Jones & Company, Inc. All Rights Reserved.
Get Adweek's Brand Marketing Daily Newsletter in your Inbox
Today's highs and lows of creativity