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Consumer Watchdog Warns Federal Regulators About Apple’s Dominance of Streaming Music; Calls For Limiting Apple Tactics To Drive Out ‘Freemium’ Music

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Jamie Court & John M. Simpson

SANTA MONICA, CA -- The nonprofit group Consumer Watchdog today wrote the Federal Trade Commission and the U.S. Justice Department asking them to investigate tactics reportedly used by Apple to drive out “freemium” (commercial sponsored) streaming music and unfairly dominate the streaming music business.

“Based on information received by our group, Apple’s new streaming music service raises serious antitrust concerns that require the government to put limitations on Apple as it develops its service if consumers are to continue to have access to free streaming music services and so-called ‘freemium’ music,” Consumer Watchdog’s president Jamie Court and Privacy Project Director John M. Simpson wrote to the agencies.  “At issue, in fact, is the proprietary information that Apple possesses about its subscribers’ credit cards and musical preferences, which it is leveraging over music labels in an attempt to rub out free (commercial sponsored) music platforms.  In this regard, Apple is utilizing its market power in much the way the company did in setting e-book prices.”

Read Consumer Watchdog’s letter here: http://www.consumerwatchdog.org/resources/ltrappleantitrust072215.pdf

The letter continued: “Confidential information provided to Consumer Watchdog suggests that Apple is pressing the three remaining music labels to give Apple exclusive rights to artists. Apple’s threat is that 1) Apple possesses more than 800 million credit cards worldwide and is uniquely situated to charge them following a trial subscription to dominate the music subscription sector. 2) Apple has inside knowledge of the music preferences of a hundreds of millions of consumers  (purportedly claiming it has 40% of all musical downloads on the Internet) and is uniquely able to leverage this knowledge to dominate the subscription music sector with whatever price it choses.  3) If the music studios don’t agree to Apple’s terms, the company will go directly to the artists and cut the music labels out of the business.

“The documents to show Apple’s tactics are purportedly currently under seal in an action before the Copyright Royalty Board where the price of compulsory copyright for streaming services is determined. The case citation is 14-CRB-0001-WR (2016-2020) (Web IV).  These are documents that the public cannot view, but that the Justice Department or Federal Trade Commission can subpoena.”

Consumer Watchdog took issue with Apple’s attempts to impose a “Most Favored Nations” clause on music labels that prevents other streaming music services from getting early access to top artists. The group also said the FTC should deem unfair or uncompetitive policies in Apple’s app store that prevent its rivals from offering services at the same or lower prices than Apple currently does.

“Given that Apple is both an online platform for music apps, the dominant one in the industry, and now a competitor of streaming music services, Apple is in a position to drive up prices for consumers,” Court and Simpson wrote.

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Visit our website at www.consumerwatchdog.org