Feds Probe Online Music Companies

Justice Department Looking For Price Fixing In Burgeoning Industry

(AP)  The U.S. Justice Department said Thursday it has launched an inquiry into possible price fixing in the burgeoning online music industry.

Two record industry officials characterized the inquiry as essentially identical to one launched in December by New York Attorney General Eliot Spitzer, who subpoenaed several record companies searching for information on wholesale prices that music labels charge for downloadable digital music files.

The Justice Department would not name the companies it has targeted. "The antitrust division is looking at the possibility of anticompetitive practices in the music download industry," said spokeswoman Gina Talamona.

The probe heightens the pressure on the music industry since Spitzer began looking at digital-music price setting last year. The music companies are turning to online sales, which more than tripled last year to $1.1 billion, after a slump in demand for compact discs.

Over the years, the recording industry has consolidated into four major labels: Vivendi Universal's Universal Music Group, Warner Music Group Corp., Sony BMG Music Entertainment and Britain's EMI Music, a unit of EMI Group PLC. Sony BMG is a joint venture of Sony Corp. and Bertelsmann AG.

With traditional album sales faltering, the major labels have charged into a market that has grown from an unregulated free-for-all to an industry with multibillion dollar potential.

Universal and Warner have been told by the Justice Department to expect a formal demand for information, according to the two officials, who requested anonymity because the probe was ongoing. Warner has publicly acknowledged that it was subpoenaed by Spitzer.

Cory Shields, a spokesman for New York-based Sony BMG Entertainment, Peter Lofrumento at Universal Music Group and Will Tanous at New York-based Warner Music Group weren't immediately available for comment. Amanda Conroy, spokeswoman for EMI Group Plc, declined to comment.

Downloads accounted for 60 percent of digital sales, while ring tones and songs for mobile phones contributed 40 percent, the London-based International Federation of the Phonographic Industry said in January.

None of the four major labels had a formal response to the news Thursday, which was confirmed after their New York offices closed for the day.