Apple is in hot water as the state attorneys general of New York and Connecticut launch a joint investigation over suspicions that Apple is exploiting its dominant position in the music retail industry to take out its competition.

In a letter sent by the Universal Music Group (UMG) to Eric J. Stock, antitrust bureau chief of the Office of the Attorney General in New York, the music label company denies [pdf] any agreements made with Apple to withdraw its music from services that offer free, ad-supported streaming music, such as Spotify, Pandora and Rdio.

Apple, meanwhile, offers Apple Music, a new on-demand streaming music service that charges a monthly $9.99 for individuals, the same fee that Spotify demands for its premium service, and $14.99 for a family of six users.

The letter also says that UMG did not agree with Apple to restrict its music licensing to Apple Music, the streaming music service that was announced at the Worldwide Developers Conference.

"This letter is part of an ongoing investigation of the music streaming business, an industry in which competition has recently led to new and different ways for consumers to listen to music," Matt Miithenthal, a spokesperson for New York Attorney General Eric Schneiderman, said in a statement sent to The Wall Street Journal. "To preserve these benefits, it's important to ensure that the market continues to develop free from collusion and other anti-competitive practices."

Apple is also facing scrutiny from the Federal Trade Commission (FTC), the Department of Justice and European antitrust officials, according to The Verge, which cites sources who claim that both the FTC and the Justice Department have begun inviting music industry executives for interviews to look into Apple's business practices.

"All the way up to Tim Cook, these guys are cutthroat," said one of the sources.

Spotify, which currently owns 86 percent of the streaming music business, has 60 million users, but only 15 million are paying subscribers. If the reports are true, Spotify going out of business due to the withdrawal of support from the record labels could give Apple Music a huge boost in numbers. Apple is the leading provider of downloadable music, but downloads are fast going downhill while streaming music is on the rise.

Schneiderman and Connecticut Attorney General George Jepsen are two of 33 state attorneys general who sued Apple and five major book publishers in 2013 for conspiring to raise the price of e-books. Apple was found guilty of violating antitrust laws and agreed to pay $540 million to customers as part of a settlement.

Photo: Cyndy Sims Parr | Flickr

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