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DOJ inquires about Apple's hold on digital music

Government wants to know what role Apple played when Amazon stopped offering discounted music prices.

The U.S. Department of Justice has begun asking questions about Apple's role in the recent scaling back of special music discounts and promotions at Amazon, according to two high level music industry sources.

Apple complained to Sony Music Entertainment after seeing material from Alicia Keys on Amazon's "Daily Deal," said a source. Screenshot by Greg Sandoval/CNET

The sources said investigators have begun speaking to a number of digital music retailers and top record labels about Apple's response to the "MP3 Daily Deal," an Amazon promotion that involved slashing prices on specific titles and pushing them heavily the day they were released. Amazon sometimes negotiated with the labels to get exclusive access to the music for a day, and the labels and their artists would often support the Daily Deal by promoting it on their Web sites.

Apple managers had informed the labels that any music included in Amazon's promotion would receive no promotion at iTunes, music industry sources told CNET in April. In one case, an industry source said then, Apple complained to Sony Music Entertainment after seeing material from Alicia Keys touted as part of the Daily Deal.

The sources who spoke to CNET on Tuesday said government investigators don't appear to be solely interested in Apple's impact on Amazon but are more focused on finding out the ways Apple has used its dominant market position to compete.

The DOJ inquiry is in its earliest stages, the sources said. The Justice Department routinely goes on fact finding missions before launching more extensive investigations, but these do not always result in the government filing charges.

Representatives from Apple and the Justice Department did not respond to interview requests.

To see an updated story on DOJ investigation, click photo

Apple wields enormous power in the music industry. Research firm NPD Group said sales of digital music at iTunes represent 70 percent of the market.

Scott Ambrose Reilly, an Amazon executive who left the company's music division in April for a post in the Kindle unit, suggested in an e-mail to music industry insiders at the time that Apple had felt threatened by The Daily Deal.

"How can I not be proud of the Daily Deal that has been so successful it riled the Cupertino beast?" Reilly wrote.

The New York Times was first to report on the inquiry about the investigation.