New York focuses antitrust probe of record labels

State Attorney General sends music companies new round of subpoenas in investigation of online-music pricing.

John Borland Staff Writer, CNET News.com
John Borland
covers the intersection of digital entertainment and broadband.
John Borland
2 min read
New York State Attorney General Eliot Spitzer has sent record labels a new round of subpoenas in his investigation of online-music pricing, music industry sources said Tuesday.

The second inquiry, following an initial round of subpoenas issued in late December, is more tightly focused on the issue of the labels' digital download activities, sources said. Labels had previously expressed concern to Spitzer's office that the original subpoenas were too broad, sources said.

Warner Music Group said in a federal securities filing Tuesday that it received a second subpoena from the New York office Feb. 3. The company did not provide details other than to say Spitzer was investigating whether digital download pricing practices had violated state and federal antitrust laws.

"We intend to cooperate fully with the Attorney General's inquiry," the label said in its filing.

A representative for Spitzer's office declined to comment on the investigation.

Spitzer's inquiry has reopened some old tensions between the record labels, which control wholesale digital music prices, and the online companies that use that content in their own businesses.

In the early days of digital music, Web companies routinely complained that labels were acting unfairly, ultimately helping trigger a federal antitrust investigation into labels' online activities. That investigation closed without any evidence of illegal behavior being unearthed.

The New York investigation comes after several music executives, from companies, have said they want to move away from the universal 99 cent price tag for song downloads and toward a model more like offline record stores, where prices can vary up or down.

Digital-music companies, some of which have also received subpoenas in Spitzer's investigation, have previously said they expected at least one major record label to begin experimenting with variable wholesale pricing early this year. That could be put on hold as a result of Spitzer's actions, however.

A California class action lawsuit has also been filed against the record labels in San Diego on the issue of download pricing, shortly after Spitzer's investigation was initially reported, according to Warner's securities filing.