U.S. FTC exploring Apple rules for streaming music rivals in App Store

By Diane Bartz and Julia Love

WASHINGTON/SAN FRANCISCO July 10 (Reuters) - U.S. government antitrust regulators are looking into claims about whether Apple's treatment of rival streaming music apps is illegal under antitrust law, according to three industry sources.

Apple recently launched a new music streaming service, Apple Music. It also provides the App Store platform for competing streaming services including Jango, Spotify, Rhapsody and others.

Apple takes a 30 percent cut of all in-app purchases for digital goods, such as music streaming subscriptions and games, sold on its platform.

While $9.99 has emerged as the going monthly rate for music subscriptions, including Apple's, some streaming companies complain that Apple's cut forces them to either charge more in the App Store than they do on other platforms or erode their profit margins.

The Federal Trade Commission is looking at the issue but has not begun a formal investigation, said the three industry sources, who requested anonymity. The agency has had meetings with multiple concerned parties, one source said. The agency meets with companies routinely, and a formal investigation may not materialize.

Antitrust lawyers interviewed by Reuters were divided on whether Apple's policies had the makings of an antitrust violation.

A spokeswoman for Apple declined to comment. The FTC also declined to comment.

As all-you-can-eat music subscriptions become more popular among listeners, a wave of companies have rushed in to cater to the demand. Apple has long been a leader in digital music through its iTunes Store, but it has been a relatively late entrant to on-demand streaming.

Streaming services' chief grievances with Apple stem from the company's 30 percent cut. To avoid it, customers can sign up for a streaming service through their Web browser, but the streaming industry sources argue that many consumers do not realize that is an option.

Tyler Goldman, CEO for North America of the music streaming company Deezer, said the bite that Apple takes out of his company's $9.99 U.S. subscription fee leaves little for Deezer.

"The margin in music is quite small, and the App Store diminishes the margin."

"It will be an issue for the industry going forward. You can either raise your prices and not be competitive with Apple's price, or you can have no margin," he said, adding that he was unaware of whether Deezer has talked to the FTC.

Two of the industry sources say that the antitrust concerns focus on restrictions in the App Store. These include a prohibition on advertising in the app that the company is on other platforms, a ban on marketing in the app that consumers can also buy directly from the company's website, and a ban on linking to a company's website from within the app. These restrictions apply to all apps, not just music streaming apps.