staff and news service reports
updated 3/3/2006 12:06:01 PM ET 2006-03-03T17:06:01

The U.S. Justice Department has launched an inquiry into possible price fixing in the burgeoning online music industry.

One music industry source said some subpoenas may have been issued already in connection with the probe, while other labels had been tipped off that subpoenas would likely be coming in the next few days.

It appeared that Sony BMG had already received a subpoena, the second industry source said.

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.

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.

The investigation also could be related to licensing renegotiations with Apple, maker of the wildly popular iPod digital music player, for its iTunes store, industry sources have said.

Last September, Apple Chief Executive Steve Jobs called the music industry "greedy" for considering hiking digital download prices and warned the move could drive iPod users to piracy.

Record label executives have scoffed at the suggestion they’re being greedy. At an investors' conference last September, Warner Music Group CEO Edgar Bronfman Jr. said that Apple’s 99-cent price for single tracks — the service charges variable prices for some album downloads — ignores the issue that not all songs are the same commercially and, like any other commodity, shouldn’t be priced the same.

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.

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