While digital distribution has forced record labels back into the business of selling singles, which they refused to do in the 1990s, that does not mean they have no market power. In fact, the record labels are now making almost as much money selling digital albums as they do selling singles, and they have increased the price of singles in the past couple of years about twice as fast as the price of digital albums. With one firm (Universal) controlling so much “must have” content, it could easily decide the fate of new digital music services by withholding content or insisting on onerous terms and conditions.
Digital distribution of music is transforming the way the market meets consumer demand, but the fact that a product is going digital or that an industry is part of the digital revolution does not mean it is immune to the abuse of market power.
The current major labels, confronted with a more efficient business model, will stop at nothing to preserve their dominance. Antitrust authorities must ensure that new competition is not squelched by anti-competitive tactics, using the full range of antitrust powers that have traditionally been used to ensure that consumers and the economy enjoy the benefits of the greatest amount of competition possible — denial or conditioning of mergers and acquisitions that substantially lessen competition, reversing actions that defend or expand monopoly power by undermining competition, prevention of unilateral monopoly abuse and blocking collusion.
This case highlights the importance of vigorous and rigorous enforcement of the antitrust laws to ensure that consumers continue to freely reap the benefits of the development of digital technologies.
Mark Cooper is director of research at the Consumer Federation of America. Jodie Griffin is a staff attorney for Public Knowledge.