Private broadcaster Stingray Digital Group Inc. argued the new CBC Music service had an unfair advantage because it is funded by the federal government.
The company, which runs the national pay-music service Galaxie and the online music service Stingray-music.com, also claimed the public broadcaster gets a preferential rate on copyright licence fees.
But the Canadian Radio-television and Telecommunications Commission dismissed both complaints in a ruling released Tuesday.
"The commission considers that (Stingray Digital Group) has not demonstrated that the CBC has given anyone, including itself, a preference, or that it has subjected anyone to a disadvantage," the regulator said in its ruling.
CBC launched an online service in February with 40 different web radio stations, on-demand music and live concerts. The public broadcaster says it has streamed more than 7.5 million hours of music since its launch, and thousands of Canadian artists have uploaded more than 130,000 songs to the site.
However, Stingray claimed that what the public broadcaster was doing was not substantially different from what private companies were offering.
"Due to its government funding and preferred copyright treatment, CBC is now positioned — whether it intends to do so or not — to harm private enterprise, and to inhibit competition in the online music environment in Canada," the company said in its CRTC submission.
The company is mulling its next move.
"Stingray is disappointed but we accept the CRTC's decision," Stingray said in a statement.
"We will be looking at other options to make sure that the CBC doesn't use its government funding and other advantages to hurt Canadian business in the dynamic and growing digital marketplace."
CBC said it welcomed the decision.
"We're very pleased by today's decision by the CRTC as CBCMusic.ca plays an important role in supporting Canadian artists across the country and in meeting the needs of Canadians in an ever-evolving digital world," Chris Boyce, executive director of CBC Radio and Audio, said in a statement.