Apple's Music Strategy Under DOJ Examination, Says Report

Apple could be under examination by the Department of Justice for its deals with music labels to distribute songs and albums online, according to a May 25 report in the New York Times, which quoted unnamed sources. Reportedly, the Justice Department is interested in whether Apple used its position as the country's largest digital-music seller to strike exclusive deals and put other retailers, including, at a disadvantage. Apple is also reportedly facing a potential antitrust inquiry over its developer agreement for the recently unveiled iPhone OS 4.

Apple's forays into the music industry are apparently under examination by the U. S. Department of Justice, suggests a May 25 report in the New York Times, with agency staffers reportedly questioning "major music labels and Internet music companies."

The article quotes unnamed sources as suggesting that any investigation was nascent and focuses primarily on any tactics Apple might have used to gain an advantage over, which also sells digital music online. Reportedly, the Justice Department seems interested in whether Apple may have secured exclusive rights to publish songs on its iTunes store before and other digital-music retailers, via the leverage that comes with being the country's largest online music seller.

Apple had not returned eWEEK's request for comment by press time.

That news follows earlier reports of Apple under scrutiny by either the Justice Department or the Federal Trade Commission over its mobile-applications policy, which forbids the use of third-party development tools in the creation of apps for Apple's App Store. According to an unnamed source quoted in a May 3 article in the New York Post, the two agencies were close to deciding which of them could pursue an actual case.

A clause in Apple's developer agreement for the recently unveiled iPhone OS 4 stipulates that "applications may only use Documents APIs in the manner prescribed by Apple and must not use or call any private API" and that "applications must be originally written in Objective-C, C, C++, or JavaScript as executed by the iPhone OS WebKit engine, and only code written in C, C++, and Objective-C may compile and directly link against the Document APIs."

In effect, this excludes applications built with tools such as Adobe Flash CS5, and may force developers to choose between building applications exclusively for Apple or for the broader smartphone ecosystem that supports those tools. Forcing developers to make that choice, in the government's eyes, may be cause for an antitrust investigation.

Despite these reported issues, not all of Apple's news had a negative cast: The company's market capitalization passed that of Microsoft on May 26, making it the most valuable U.S. technology company, with a value of $227.1 billion based on stock price. That managed to barely edge out Microsoft, whose capitalization stands at $226.3 billion, and placed Apple second on the list of highest-valued American companies, behind Exxon Mobile and its $282 billion market capitalization.

The achievement also mirrors another from August 2008, when Apple's market capitalization briefly exceeded that of its other major rival, Google; at the time, Microsoft's market cap stood at $254.83 billion. And as Microsoft and Google have both learned, with larger size often comes more scrutiny.