Apple's Streaming Music Service Could Lead To Higher Prices, Lawmaker Warns

At first glance, Apple's recent entry into the streaming music market would seem to increase competition by giving consumers another option for listening to music online.

But some policymakers are warning that Apple's new service ultimately might lead to higher prices.

"I am concerned," Sen. Al Franken (D-Minn.) says, "that Apple's position as a dominant platform operator may actually undermine many of the potential consumer benefits of its entry into the market."

Franken specifically criticizes Apple's agreements with app developers, which require that developers pay a 30% fee on all in-app purchases made via Apple devices. The licensing agreements also prohibit apps from explaining how prices are affected by Apple's policies. Those requirements apply to all developers, including rival companies -- like Spotify -- that offer users apps for Apple devices.

"Apple's licensing agreements have prevented companies from using their apps to inform users that lower prices are available through their own websites, to advertise the availability of promotional discounts, or to complete a transaction directly," Franken writes in a letter urging the Justice Department and Federal Trade Commission to investigate Apple.

Franken adds that those prohibitions could result in consumers paying "substantially more than the current market price point."

Advocacy group Consumer Watchdog also is urging regulators to investigate Apple.

"While Consumer Watchdog has traditionally had much respect for Apple’s privacy policies, which protect consumers’ private information in a proprietary cloud, the market power and leverage Apple is exerting in the creation of its new streaming music service is very disconcerting and must be stopped," the organization says in a letter to the FTC and DOJ.

Consumer Watchdog adds that it has received "confidential information" suggesting that Apple is asking the major music labels for "exclusive rights to artists."

The group warns that Apple can draw on its "inside knowledge of the music preferences of a hundreds of millions of consumers" to "dominate the subscription music sector."

Even without the recent calls to investigate, federal authorities appear concerned by Apple's policies. Earlier this week, The Verge reported that the FTC already sent subpoenas to music streaming services, as part of its investigation into Apple's policies.

Apple's checkered antitrust history probably isn't helping the company's reputation with regulators. After all, it was only five years ago that Apple's entry into the ebook market resulted significant price increases for consumers. Prior to Apple's entry, Amazon sold many ebooks for just $9.99. After Apple masterminded a price-fixing conspiracy, prices rose across the board to $12.99 and higher.

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