Sony Music has said that the suggestion of antitrust violations are “nothing but speculation and conjecture” and a pretext for avoiding $17 million claim and allegations of fraud by Rdio, which has been in Chapter 11 bankruptcy since November 2015. Rdio received $75 million from Pandora for the sale of assets – and Sony want their share – but is now facing some serious allegations of anti competitive behaviour from Rdio.
Rdio was an online music streaming service that offered ad-supported free streaming and ad-free subscription streaming services in 85 countries. It was available as a website and via apps for Android, BlackBerry, iOS, and Windows Phone mobile devices, which could stream music from Rdio’s servers or download music for offline playback.
The Hollywood Reporter reports that Rdio has retained Winston & Strawn to investigate whether Sony for colluded with Universal and Warner Music in the streaming music market. Sony has itself issued legal proceedings against three of Rdio’s top executives, alleging that before Rdio declared bankruptcy, the company made misrepresentations, false statements and concealments in order to avoid paying millions of dollars for streaming music from Sony artists including Michael Jackson, Bruce Springsteen, Beyonce and others. Sony alleges that the bankruptcy has been set up to enrich insiders including Rdio chief executive officer, Anthony Bay. With a $12.4 million claim, Sony is Rdio’s largest unsecured creditor. Additionally, Sony’s subsidiary Orchard, which specialises in digital licensing for independents, has a $4.5 million claim and is Rdio’s third-largest unsecured creditor.
Rdio allege: “In particular, the Debtor believes that Sony and Orchard have engaged in anti competitive conduct to fix and control prices and unreasonably restrain trade for the licensing, marketing, and use of music by services, like the Debtor, for the digital streaming of music to consumers worldwide” and “For example, one of the Debtor’s preliminary antitrust theories relates to what are commonly known as Most Favored Nations clauses (‘MFNs’) which play a major role in Sony’s agreements with Rdio and in Orchard’s agreements with Rdio.” In a battle between Apple and Amazon, the 2nd Circuit Court of Appeals agreed that under the right circumstances, MFNs can be misused to anti-competitive ends and can facilitate horizontal coordination and reduce a company’s incentive to deviate. Apple also faced a 2015 investigation by the US Justice Department who were reported looking into Apple for allegedly forcing Spotify into ending free tiers, but according to one source, the investigation closed without any adverse finding. Sony says that entailed a “completely different type of MFN — an MFN in which a seller promises to give a buyer the best price it offers anyone else.”
Sony say that “the MFN in the Sony Music/Rdio agreement requires Rdio (the buyer) to give Sony Music (the seller) an overall deal that is at least as good as it offers anyone else”. “Debtor has not cited a single case finding that this type of MFN leads to anticompetitive collusion. And for good reason: This type of MFN cannot prevent any record company from providing Rdio or any other audio subscription streaming service a lower price” and Sony said that this entailed a “completely different type of MFN — an MFN in which a seller promises to give a buyer the best price it offers anyone else.”