Together, EMI, Sony BMG Music Entertainment, Universal Music Group Recordings, Inc., and Warner Music Group Corp. produced, licensed, and distributed 80 percent of the digital music sold in the United States. The companies formed MusicNet to sell music to online ser- vices that sold the songs to consumers. MusicNet required all of the services to sell the songs at the same price and subject to the same restrictions. Digitization of music became cheaper, but MusicNet did not change its prices. Did MusicNet violate the antitrust laws? Explain.

The correct answer to this open question is the following.

Yes, MusicNet violates the antitrust laws.

Indeed, these companies are forming a monopoly in the music business industry. Warner Music, Universal, Sony, and EMI control 80% of the digital music industry due to the fact that they own the rights of most of the popular artists and bands worldwide. When these companies decide to form MusicNet they are creating a monopoly to exert its dominance in the market.

In the case of the United States, three important legislations have to deal with antitrust laws: the Sherman Antitrust Act, the Clayton Act, and the Federal Trade Commission Act.

So what MusicNet is doing is limiting the consumer's choices to buy music, imposing its own conditions and restrictions. And that is not fair in American free-market conditions.

a

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