The Department of Justice and the Federal Trade Commission are looking closely into Apple’s business practices in relation to its upcoming music streaming service, according to multiple sources. The Verge has learned that Apple has been pushing major music labels to force streaming services like Spotify to abandon their free tiers, which will dramatically reduce the competition for Apple’s upcoming offering. DOJ officials have already interviewed high-ranking music industry executives about Apple’s business habits, but it appears the FTC has taken the lead in recent weeks.
"All the way up to Tim Cook, these guys are cutthroat."
Apple has been using its considerable power in the music industry to stop the music labels from renewing Spotify’s license to stream music through its free tier. Spotify currently has 60 million listeners, but only 15 million of them are paid users. Getting the music labels to kill the freemium tiers from Spotify and others could put Apple in prime position to grab a large swath of new users when it launches its own streaming service, which is widely expected to feature a considerable amount of exclusive content. "All the way up to Tim Cook, these guys are cutthroat," one music industry source said.
Sources also indicated that Apple offered to pay YouTube’s music licensing fee to Universal Music Group if the label stopped allowing its songs on YouTube. Apple is seemingly trying to clear a path before its streaming service launches, which is expected to debut at WWDC in June. If Apple convinces the labels to stop licensing freemium services from Spotify and YouTube, it could take out a significant portion of business from its two largest music competitors.
Apple has an antitrust monitor on its campus, courtesy of the DOJ after Apple was found guilty in an ebook antitrust case last year (Apple is appealing the decision), but it's not clear if that monitor is involved in this latest situation. The DOJ and the FTC aren't the only entity looking into Apple’s dealings with the music industry, either. According to the New York Post, Apple is being probed by the European Union’s Competition Commission to find out if the company is working with the labels to rid the industry of freemium services.
Apple declined to comment.
Update: May 4th, 9:15PM: This post has been updated to clarify the FTC's primary involvement.