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Antitrust Regulators Eye Online Music Ventures

Antitrust enforcers at the U.S. Justice Department are investigating the online music business, including two new joint ventures in the industry, an industry source said on Monday.

The department is in the initial stages of a probe that includes the industry’s Pressplay and MusicNet ventures and, more generally, how major record labels control online distribution of copyrighted music, the source said. “They have launched an investigation.”

Spokeswomen for Pressplay and MusicNet declined to comment, as did a spokeswoman for the Justice Department.

MusicNet, one of the industry’s answers to the song-swapping service Napster, has the backing of AOL Time Warner Inc., Bertelsmann AG, EMI Group Plc and RealNetworks Inc.

Pressplay is a venture owned by Sony Corp.’s Sony Music Entertainment Inc. and Vivendi Universal’s Universal Music Group, which uses technology from MP3.com.

It is not uncommon for the department to look into joint ventures among such big industry players. Nor is it clear the exact issues the department is focused on.

However, the record labels have come under criticism recently from some lawmakers on Capitol Hill over competition issues.

On Friday two Congressmen introduced a bill aimed at rewriting music licensing and copyright laws to promote competition among online music service distributors and make it easier to buy and sell digital songs.

One of the bill’s co-sponsors, Utah Republican Rep. Chris Cannon, said in a statement that he has “watched with dismay as companies such as Musicmaker.com and Riffage.com, which tried to distribute licensed music via the Internet, have gone out of business, often because they could not get content from the labels or the publishers.”

Cannon said there are “troubling signs that the recording industry – as a group – may have chosen not to license music content for tactical reasons in an attempt to stifle competition.”

“They want to be the owner of the content, the producer, the wholesaler, and the record store online. And with cross-licensing agreements, they are in a position to leverage their collective market power to the exclusion of the competition,” Cannon complained.

Among other things, the bill sponsored by Cannon and Democratic Rep. Rick Boucher of Virginia, would require the major music companies involved in the joint ventures to make the same terms available to independent online music distributors.

The industry’s trade group, the Recording Industry Association of America (RIAA), criticized the bill last week as “essentially a solution – a very bad solution – in search of a problem.”

Association director Hilary Rosen said the marketplace “is already moving in the right direction and that consumers will be served well by both the current and coming plans for online music services.”

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