Department Of Justice Ends Music Industry Probe

by Glen Shapiro, LawAndTax-News.com, New York

25 December 2003

The United States Justice Department on Tuesday announced the closing of its investigation into the major record labels’ pressplay and MusicNet joint ventures, saying that ample competition exists in today's world of digital music. R. Hewitt Pate, Assistant Attorney General in charge of the Department’s Antitrust Division, said: "Consumers now have available to them an increasing variety of authorised outlets from which they can purchase digital music and consumers are using those services in growing numbers.

“The Division’s substantial investigation of pressplay and MusicNet has uncovered no evidence that the major record labels’ joint ventures have harmed competition or consumers of digital music. Consumers now have available to them an increasing variety of authorized outlets from which they can purchase digital music, and consumers are using those services in growing numbers.

“None of the several theories of competitive harm that the Division considered were ultimately supported by the facts. The Division found no impermissible coordination among the record labels as to the terms on which they would individually license their music to third-party services. The development of the digital music marketplace similarly belies any concerns that the record labels used their joint ventures to stifle the development of the Internet music marketplace and to protect their present positions in the promotion and distribution of prerecorded music in physical form.”

The investigation, begun in 2001, involved joint ventures put together by major record labels, Pressplay and MusicNet, to distribute music over the internet. Before that, the labels had authorized no internet businesses to provide consumers a way of searching and downloading songs. The Roxio software company recently bought Pressplay from Sony Music Entertainment and Universal Music Group. MusicNet is a venture by Warner Music Group, EMI Group, BMG Music and the RealNetworks medical company.

The DoJ commented that the digital music world has changed dramatically since the Division opened its investigation in the summer of 2001 and the concerns that led the Division to open its investigation have now diminished or disappeared. Consumers can now download individual songs from a growing number of competing digital music suppliers, each of which offers songs from the music catalogs of all five of the major record labels. Consumers also have their choice of subscription-based music services that, for a monthly fee, allow subscribers to browse hundreds of thousands of songs, to listen to “streams” of an unlimited number of songs of their choice, and to download the particular songs they want to “burn” to compact discs or transfer to portable devices.

The DoJ says it closely examined whether the joint ventures diminished competition among the major record labels in the terms on which they licensed their music to third-party music services that sought to compete with the joint ventures. "The poor quality and restrictive nature of pressplay’s and MusicNet’s services at launch in December 2001 provided some support for this theory," says the DoJ. "As time passed, however, both joint ventures released improved and more consumer-friendly versions of their services, and the major labels licensed their music to a broader array of third-party music services that compete on price and features. Consumers can now download individual songs from broad music collections offered by at least five such services, and might soon be able to choose among a dozen suppliers." The Division concluded from those developments that the major labels are not impeding the promotion and distribution of music over the Internet.

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