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iTunes(UK) Targeted By The Office of Fair Trading
dreadz1 writes "It seems that Apple is under fire for overpricing it's iTunes music for UK customers. This story from the BBC says that here in the UK we are charged 20% more for music on iTunes than the French and the Germans. Should Apple lower its initial price so that the cost+VAT is equivalent to prices in the EuroZone or should we grow up and get used to the fact that things are priced differently in different places?"
The way globalization works is this: you compete with some overseas guy for a job, so in the long term, you probably still have a job, but it's at lower wages.
However, this doesn't really matter in the long term because producers are competing with each other internationally too, driving price down. In fact <waving hands>since capital is freed to seek the most efficient distribution of resources, productivity goes up on one hand, and competition drives prices for goods down even more than wages. This means that while on paper you make less money, your real buying power is increased and everybody wins.</waving hands>
But --- corporations don't want to compete on price internationally, whether it is on prescription drugs, or entertainment like music and moves. Differential pricing allows them to make greater profits. But the whole system of assumptions that resulted in everybody winning falls down if corporations are not forced to compete on price internationally along with labor.
Post may contain irony: discontinue use if experiencing mood swings, nausea or elevated blood pressure.
Eh, that is not growing up. It's the companies that need to realize that people will buy where it is cheapest and will feel cheated if the price is higher where they happen to live.
Earth to Britain: If you're tired of being gouged by your local vendors (as compared to the continent), adopt the euro.
People in the UK have always been gouged on everything. What sells for $1 in the US usually sells for £1 in the UK (and now 1 in most of Europe). Great for foreign companies selling into the UK market. Not so great for UK companies that have to pay inflationary wages to local employees just to survive.
I don't know why the UK puts up with this state of affairs. I wouldn't be surprised to learn those who gain under the present arrangement might manipulate of nationalist sentiment against the euro through media outlets they control.
-Isaac
I am not a lawyer, and this is not legal advice. For Entertainment Purposes Only.
What are you talking about? Do you have the slightest idea how exchange rates work? Just because you get fewer units of a currency for a number of units of your currency doesn't mean you suddenly have less money - it just means that you get 'more bang for your buck'. VAT in the UK runs at 17.5%, and as far as I can see, it's an extremely nebulous legal area as to whether they should be charging VAT at all, as you're paying for digital media, rather than a physical item...
VAT law in the UK is ugly, some things are zero-rated for VAT (cold food, books), and some things are VAT exempt (examples, anyone?)... There was a case a few years back when people first started charging for online services such as web design, and whether they should be charging VAT on the labour, or on the finished product... Needless to say, it got messy... Anyway, not entirely sure where I'm going with this, so I'll shut up.
And how would this help overcharging? I seem to recall many countries had price rises after switching to the euro.
They would have an argument if they were overcharging on real CDs. However, a digital download costs the same to send to Germany or the UK, so why the discrepancy? It's profiteering isn't it?
The Pound/pence/quid or whatever its called these days will fluctuate compared to the Euro. Its conceivable that if the Pound drops in value relative to the Euro the oposite will occur (It will be cheaper in the UK).
The VAT is an English problem.
The way to prevent this is to have the UK peg the pound to the value of the Euro (China does this to the dollar). This is not easy. Maybe it Euro time.
For what its worth some tourist in europe I've heard complaining about everything in England and Switzerland costing more. It might be becuase its different currency your getting gouged on prices becuase its hard to convert/compair
Why doesn't the consumer group go after Napster and OD2, both of which operate in Britain and actually cost up to 20% more than iTunes? Is there some sort of bias in the system here? And it shouldn't be about market share, since in Britain the competition holds a bit stringer against iTunes than in the States. Where is this group coming from (from a backing standpoint), and why no mention of the others?
***
I have a feeling the reason behind Apple's doing this (requiring stores to only sell to their local country) is an attempt to avoid running afoul of local laws regarding IP. The original rights holders do get compensated, but oftentimes in a large corporation (like WB, for instance) individual divisions compete against each other in order to avoid being prosecuted for antitrust (this is why antitrust came about in the first place-railroads would buy up all of their suppliers and then trade amonst themselves at greatly reduced prices). This has happened at Sony, where the digital media arm makes decisions that enable people to pirate stuff from the music arm.
You are right about the VAT being charged to the end-consumer, even if it is a company. My mistake sorry.
The system is easy for trade within a country, or simple goods exchanges across borders.
However, the system is more difficult, because of "triangle-operations" in the EU, and the fact that you have to take care of the 'location' of the service or delivery. In addition to that, every country adopts the same VAT legislation by Europe, but can (within certain boundaries) add or change specific rules. I have a book of 1000 pages on VAT law... Believe me, you are welcome to do our VAT declaration anytime!
E.g. what if I am a Belgian garage with a VAT number that dispatches a worker to fix a car across the border in the Netherlands, that was driven by the employee of a US firm that has a VAT representative in Italy?
- Location of service: Netherlands
- It is a service, so I have to charge VAT. Dutch or Belgian VAT?
- Invoice address = America
- VAT Representative and VAT number of an American firm in Italy: what happens with VAT charges?
- What if I replace the alternator on the car? Is that a delivery to the Netherlands? USA? Italy?
- What if the car was actually owned by a French rental firm, but the damage was not covered by the rental contract, and I have to charge the US firm? What with the VAT of the alternator, that finally ends up in France?
- Etc..
Believe me, it is far from simple...