The Competition and Markets Authority (CMA) announced the formal launch of its investigation into the music streaming market, saying it will examine the market "from creator to consumer".
Plans for the probe were announced last October. In a statement issued today, the CMA said its investigation will pay particular attention to the roles played by record labels and music streaming services.
In the UK, more than 80% of recorded music is now listened to via a streaming service rather than traditional media like CDs and vinyl.
A report by MPs last year raised concerns about how the streaming market is dominated by services like Spotify, Apple Music and YouTube, with artists receiving "meagre returns".
The CMA said its study will assess how well the market is working for audiences, whether innovation is being stifled and if any firms hold excessive power in the way they influence listeners’ choices and experiences.
It will also consider how any lack of competition between music companies could affect the musicians, singers and songwriters, "whose interests are intertwined with those of music lovers".
The watchdog said it will consider what action may be necessary to remedy any problems.
"A vibrant and competitive music streaming market not only serves the interests of fans and creators but helps support a diverse and dynamic sector, which is of significant cultural and economic value to the UK," said Andrea Coscelli, the chief executive of the CMA.