What the Apple Music antitrust inquiry is really about

Fortune – Apple has something of a reputation when it comes to antitrust issues. That doesn’t mean news of a FTC inquiry into Apple Music means much.

You could be forgiven for thinking “here we go again” upon learning that Apple’s new music service is a topic of conversation at the Federal Trade Commission. After all, this is the company set to pay $450 million to resove a price-fixing scheme over ebooks, and whose late co-founder has been called a “walking antitrust violation.” But in reality, the FTC inquiry into Apple Music, a new subscription streaming service, will likely yield no more than fleeting headlines passed around by the company’s competitors.

The inquiry itself came to light on Friday through a Reuters report based on “industry sources,” who said the federal agency has met with “multiple concerned parties” over Apple’s treatment of rival streaming services. Their biggest concern is presumably the 30% cut that Apple  AAPL 1.89%  takes from every service that collects a payment through its iTunes store.

In practice, that means Apple can sell its Music subscriptions for $9.99 per month on iTunes while the likes of Spotify must charge $12.99 (the extra $3 is, of course, to make up for Apple’s 30% distribution levy).

It’s hardly a surprise, then, that Spotify and other streaming services like Rhapsody don’t like this arrangement. But that doesn’t mean it’s illegal. According to Joe Sims, an antitrust expert at Jones Day in Washington, the FTC conversations don’t necessarily mean there will be legal consequences.

“Every year, there are hundreds of quote/unquote investigations. The number of those that mature into formal investigation are very small. Unless and until you see that stage, it’s sort of hard to get excited about it,” he said by phone.

Sims also suggested that, in the case of the app store, the only means by which the FTC could launch an attack is through Section 2 of the Sherman Act, a law that concerns monopoly-related abuses by a single firm. He described such cases as “hard.”

For a Section 2 case against Apple, the FTC would have to establish that the company has monopoly power in a given market in the first place, and that it’s doing something to harm competition (not just competitors). It’s difficult to see how either condition is met.

While Apple has power over its iTunes store, it certainly does not have power over streaming music as a whole – consumers can subscribe for streaming music through Google Play or, as Spotify itself pointed out in an email to subscribers, directly on a company’s website. Meanwhile, Apple’s decision to collect a 30% cut is hardly something new; the company has long collected the same toll from anyone else who sells media through its store. (The Apple ebooks antitrust case, incidentally, involved a completely different part of the law).

There are more nuances to antitrust law, of course. But the upshot for now is that the chatter about FTC and Apple Music sounds less like a serious monopoly case, and more like a case of competitors trying to gin up some bad PR for their new streaming rival.

Article by Jeff John Roberts for Fortune

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