U.S. Inquiry on Apple Music Tactics

The inquiry is in the very early stages, these people say, and the conversations have revolved broadly around the dynamics of selling music online.

But people briefed on the inquiries also said investigators asked in particular about recent allegations that Apple uses its dominant market position to persuade music labels to refuse to give another online retailer, Amazon.com, exclusive access to soon-to-be released music.

All these people spoke on condition of anonymity, since the matter is sensitive. Representatives from Apple and Amazon.com declined to comment. Gina Talamona, a spokeswoman for the Justice Department, also declined to comment.

In March, Billboard magazine reported that Amazon.com was asking music labels to give it the exclusive right to sell certain soon-to-be-released songs for one day before the songs go on sale more widely. In exchange, Amazon promised to include those songs in a promotion on Amazons Web site called MP3 Daily Deal.

Representatives from Apples music service, iTunes, were asking the labels not to take part in Amazons promotion, and Apple punished those that did by later withdrawing marketing support for those songs on iTunes, the magazine reported,.

Apple is by far the largest seller of online music in the United States, with 69 percent of the market, according to data from NPD Group, a marketing consultancy. Amazons MP3 store was in second place, with an 8 percent share. Apple is also the largest seller of music over all, with 26.7 of the overall market, up from 12 percent in 2007.

Though the Justice Departments inquiry is by all accounts preliminary, it represents additional evidence that Apple, once the perennial underdog in high tech, is now viewed by government regulators as a dominant company with considerable market power. The iTunes store is also the venue for the company to sell electronic books and applications for its iPhone, iPod Touch and iPad hand-held computing devices,

Certainly if the Justice Department is getting involved, it raises the possibility of potential serious problems down the road for Apple, said Daniel L. Brown, an antitrust attorney at the law firm Sheppard Mullin Richter & Hampton. Without knowing what acts or practices they are targeting, its difficult to say exactly how big a problem this is. But its probably something Apple is already concerned about.

The inquiry is one of several by the federal government involving Apple. The Federal Trade Commission is also moving ahead with a separate inquiry into Apples rules for developers who create applications for its iPhone operating system, according to a person familiar with that discussion. That inquiry, prompted by a complaint from Adobe Systems, the maker of the Flash format for Internet video, is said to be in its early stages as well.