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Why the Justice Department wonders if Apple is cheating

The US Justice Department is reportedly looking into Apple's music deals. Is the king of digital music resorting to dirty tricks?

By / May 26, 2010

Apple CEO Steve Jobs rolls out new iTunes and iPod features in 2007. In 2010, the Justice Department is looking into Apple's retail practices.

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The US Justice Department began looking into the digital music business this month, apparently curious if Apple has been inappropriately throwing its weight around. According to unnamed sources in recent reports, investigators sat down with executives from several major music labels and digital music stores.

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These interviews could lead to a case against Apple for anti-competitive practices, or officials could conclude that Apple has done nothing unseemly. Right now, it's too early to tell.

It appears the Justice Department is following up on rumors that Apple has pressured music companies not to participate in Amazon.com's “MP3 Daily Deal.” The promotion offers Amazon shoppers exclusive early access to digital songs before they go on sale in other stores. Billboard magazine first hinted in March that Apple tried to dissuade labels from joining in and "punished those that did by withdrawing marketing support for those songs on iTunes," added the New York Times.

Apple has a lot of sway with the music labels. It's the largest music retailer in America and makes up 69 percent of online music sales. Amazon enjoys less than half of Apple's overall music market share – and only one-eighth of Apple's digital sales.

Steve Jobs and crew have been known to play hardball. "The major labels wanted variable pricing on songs and albums and for years Apple resisted," writes CNET. "In 2005, Apple CEO Steve Jobs said the top recording companies were 'getting greedy' after music execs considered a music price hike. Last year, Apple finally gave the labels some additional control over song pricing. The big record companies wanted the ability to sell albums that were unbundled, meaning they wanted Apple to sell hot LPs as a full package and refrain from selling individual songs from these works. Again, on this issue Apple hasn't given much ground."

In both of those cases, Apple has painted itself as the good guy fighting for consumers. If these new allegations are true, the company may have a harder time defending itself – both to the public and to a judge.

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