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US to probe for digital music price fixing

European record labels under scrutiny

European record labels were keeping quiet this morning regarding a potential US DoJ (Department of Justice) investigation into digital music price fixing.

Universal Music didn't have any information about possible requests from the DoJ, which would most likely have been sent to New York-headquartered Universal Music, a unit of the French company Vivendi Universal, said Adam White, a spokesman for Universal Music.

EMI hasn't responded to a request for comment and Bertelsmann said only Sony BMG, based in New York, could comment.

Reports of the investigation appeared today in publications including The Wall Street Journal. In addtion to Universal, EMI and Sony BMG, the reports also listed Warner Music among the companies said to be under investigation.

It's reasonable for authorities to consider an investigation, said Mark Mulligan, a research director at Jupiter Research. "Even if there isn't any evidence, there's this situation and the circumstances of the environment for suspicions," he said.

A few aspects of the music market, including the consolidation that allows four major labels to control most of the revenues, make a situation ripe for potential manipulation, he said.

Also, those labels are under pressure to protect revenues due to the uncertainty of the effect digital music might have on the bottom line in the future, Mulligan said. "The music industry still isn't sure whether the legal downloads market is going to grow or shrink the overall music market," he said.

As a result, they've kept the price of digital music relatively high. "Let's face it, the DoJ wouldn't be doing this if they thought they were fixing the prices too low," Mulligan said.

In addition, authorities have already suspected record labels of fixing the price of CDs, and the European Commission has found evidence of CD price fixing by the major labels, he said. "There's a big part of this investigation that would have to consider these different market factors to determine why prices are where they are," he said.


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