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Justice Dept. probes online distrib services

The dog days of August have brought more than blistering heat for the recording biz, which is being asked to prove why two online music distribution services backed by the majors won’t snuff out competition.

Industry execs on Monday confirmed that the Dept. of Justice is conducting a preliminary inquiry into MusicNet and Pressplay, both of which are scheduled to bow within weeks. They said that such an inquiry was essentially assured when the European Union announced its own investigation earlier this summer of the two services.Both companies promise digital music tracks on a subscription basis, offering several thousand major-label tracks for a flat fee. MusicNet, which is backed by AOL Time Warner, Bertelsmann, EMI, Zomba Music and media software maker RealNetworks, has licensed its service to AOL, Real and Napster. Pressplay, a 50-50 venture between Sony and Vivendi Universal, has inked partnerships with Yahoo, Microsoft’s MSN Music and MP3.com.

The nascent music Netcos have declined to comment about the probe as yet. Sources close to the situation said at least one of the majors backing the companies has been in contact with the Justice Dept. in an attempt to hammer out a compromise, but the talks are still very preliminary.

Lawmaker chorus

Last Friday, two Capitol Hill lawmakers said they were likewise concerned about a possible monopoly by the majors, and they introduced legislation that would force music congloms to offer the same price and other conditions when striking licensing deals with unaffiliated Internet ventures.

Reps. Rick Boucher (R-Va.) and Chris Cannon (R-Utah) said they were alarmed that a distribution duopoly might be forming, and they promised hearings on their legislation when Congress returns in early September from the August recess.

Napster veep for public policy Manus Cooney, who was on hand as the lawmakers detailed their bill, said introduction of the measure was “encouraging” news.

Washington insiders cautioned that the DOJ probe is only preliminary in nature and that other Internet ventures have been likewise studied for possible antitrust violations.

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