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No deal with Apple to kill free music, Universal tells state investigators

In a letter to the attorneys general of New York and Connecticut, lawyers for the Universal Music Group say the label hasn't engaged in anticompetitive practices with Apple over free streams from Apple rivals like Spotify.

Apple CEO Tim Cook, second from left, with, from left, Beats' Jimmy Iovine and Dr. Dre, and Apple exec Eddy Cue. Apple bought Beats for $3 billion, and its subscription streaming service has helped form the foundation for Apple Music. Apple

Universal Music Group has no deal with Apple and its just-announced Apple Music service to put the kibosh on free music-streaming offerings from Spotify and other Apple rivals. That's according to a letter sent by the label in response to an investigation by the attorneys general of New York and Connecticut.

A June 8 letter [PDF] written by a lawyer for UMG and posted by the New York State attorney general's office cites an ongoing investigation by the two states that "concerns whether participants in the music industry are seeking to act collusively to restrain competition among music streaming services."

In particular, the letter says, the inquiry is looking at whether industry players are "working together to suppress the availability to consumers of free, advertising-supported, on-demand music streaming or similar services, such as those offered by Spotify and YouTube."

A report last month said that ahead of Apple's launch of Apple Music, the US Department of Justice was investigating whether Apple was pushing labels to choke off free streaming options at competitors like Spotify. And an earlier report, in April, said the European Commission was also looking into Apple's negotiations with music labels.

Streaming music's rapid growth, driven by ad-supported free tiers rather than paid subscriptions, has come at the expense of digital downloads and other sales of music. In the early days of music's digitization, Apple threw the music industry a life line by popularizing paid digital downloads with its iTunes software, but the computing giant's late entry into the streaming format means smaller startups like Spotify have a significant lead and that Apple needs to catch up.

Apple's other attempts to get special treatment from labels fell flat, but any push to limit free options would have come as the music industry has begun to question such options. Services like Spotify have pitched free tiers as the gateway for people to pay for subscriptions, but labels and artists are unhappy with how willing people are to listen for free by sitting through ads.

Apple unveiled its Apple Music offering Monday. The service launches later in June, with the first three months free, and, after that, a subscription fee of $10 per month for individuals and $15 per month for families of six or less. Spotify's ad-free version costs $10 per month for individuals, plus $5 per month for each additional user.

The UMG letter says the label has no agreements with Apple or with Sony Music Entertainment or Warner Music Group designed to interfere with free services. It also says that while UMG does have exclusivity deals with some streaming services, such arrangements are "based on our legitimate unilateral business interests and not part of an agreement to restrain competition."

In a statement, a spokesman for the New York attorney general's office said the UMG letter is "part of an ongoing investigation of the music streaming business, an industry in which competition has recently led to new and different ways for consumers to listen to music" and that "to preserve these benefits, it's important to ensure that the market continues to develop free from collusion and other anticompetitive practices."

Meanwhile, Connecticut Attorney General George Jepsen said in a statement that "We have been working with New York to investigate concerns about potential anticompetitive conduct in the music streaming industry" and that "at this point, we are satisfied that Universal does not have in place -- or in process -- anticompetitive agreements to withhold music titles from no-charge streaming services."

Apple declined to comment.

CNET's Joan E. Solsman contributed to this report.