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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?"
If the music companies in the UK charge more, then Apple will charge more.
Simple economics.
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.
The prices should be same or pretty clsoe throughtout Europe because of the common market. It makes sense that they should be pretty even. You have to wonder, if the UK had the Euro, would they charge only 0.99 or would they have upped it to 1.29 ?
for not replacing the pound by the Euro.
I assume that the prices in Germany and France are the same, because they have the same currency.
btw Apple hardware is much cheaper in the US than in Europe - how about complaining on this?
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.
At some point, industries are just going to have to get used to the fact that people want to buy from *everywhere*, not just the store in their own town/state/country. If someone in the UK wants to buy from the US store, they should be allowed to, at the US prices. Just like anyone in the US who wants to buy from Amazon-UK can. The downside is you only get whatever international support, if any, the distant store feels like offering.
Of course, content-owners don't like this, 'cause they like having their own little state-sanctioned monopoly on their own content and for some reason can't stomach the fact that someone in another country might want to sell the same stuff.
The way I figure it, if the original rights holders have been compensated, then any and all cross-border traffic in IP goods should be permitted. Why should I care if $$ go to Warner Brothers in the UK or in the US, as long as it goes to WB?
Solve that problem, and pricing disparities between different countries' stores will eventually disappear (or the stores will, 'cause they're not being competitive).
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.
I hate to tell english people this but it should be 100% more. I was just there and the exchange rate is about 2 dollars = 1 pound. So a 30% charge barely covers the VAT.
You bleeding idiot.
"In the UK, iTunes charges punters 79p (120 euro cents) to download one track. In both France and Germany the cost is just 99 euro cents - about 67p."
Not 20% more numerically in different currencies, 20% more in value, in the same currencies. You really thought people couldn't account for the exchange rate? Shocking.
I'd like to apologize for all the Americans saying stupid things in this discussion. We're sorry. We sadly can't keep our more ignorant members of our country out of these things. Please don't assume all Americans can't comprehend things like "exchange rates", and also probably couldn't find their own country on a map.
Thanks again!
Quidquid latine dictum sit, altum sonatur.
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 don't know what exactlty the price difference is between UK and Germany, but for Slashdot readers to form their opinion, please take into account the following:
...
... are different between countries. The EU is for now still a free-trade zone that uses one single currency (well, the execpt UK and some other country) but it is NOT a single country. This means that you have different laws, taxes, wages, warranty requirements, ea. for different countries. So, necessarily the price that the end counsumer has to pay for a products is different. There is also a difference in shipping costs, between a country as large as Germany, and one as small as Belgium. Warranty on electronics in Germany is 2 years (by law). In Belgium it is 1 year. Translations of manuals for 100 million German speaking people or 10 million French/Dutch speaking also make products in Belgium more expensive. Etc.
- VAT rates are different for different countries in the Euro-zone. I think it is crap as well, but it is a fact of life. Most of the time you have two or three VAT rates on goods. 0% VAT, a basic rate and a high rate. The zero and basic rate are generally applicable to goods that are considered to be "basic necessities", e.g. food. The high rate is for "luxury items", e.g. electronics, perfume, services,
E.g. the VAT rate of books in Belgium is 6%, in the UK it is 0%. The VAT rate on a computer in Belgium is 21% and in Germany 16%. This causes serious price differences. Some companies decide to absorb the VAT differences and hence charge less excluding VAT in one country than the other, to avoid price differences. Others do not.
I live in Belgium, and it sucks to be in a country where everything execpt food is charged 21% extra... Well, social security is good though...
Local legislation, wages, taxes,
All these factors also causes end user prices to differ between countries.
I don't think that is fair at all, but it is the way it is... We can only strive for more European harmonisation... I for one, would like to have one single (read 'lower') VAT rate, tax rate, etc... but others (like the UK) are more protectionistic, and don't want the EU to take to much power....
The last time I checked the price excluding VAT of Apple harware in the Netherlands is higher than in Belgium, so I suspect Apple tries to harmonise the prices between the Netherlands and Belgium
Exchange rates fluctuate Exchange rates could be the reason for prices differences between the UK and the EU mainland. If the UK wants to avoid that: join the Euro! But, this also means companies like Apple have to hedge against exchange rate differences. (For information on hedging, see google.) Basically you make a contract to buy x amount of EUR in the future at a given exchange rate now. This COULD be safer for a company if it anticipates changing exchange rates correctly, but carries costs as well. These are also factored into the product end price.
And, as I said before, do not underestimate the wage effect...
By the way,
Inter-company trade does not have to pay VAT. VAT is a tax paid by endconsumers (private persons), companies that trade with each other pay VAT on goods they buy, but can redeem this from the tax authority. Companies charge the private persons VAT, and pay it to the government. It is a difficult system, search on google if you want to know more.
Inflation isn't really that high in the UK, it's the strong GBP/weak USD that makes the UK expensive for Americans.
Decode these
If your prices are too high from taxes, might I suggest throwing boxes of tea into the Thames?
We may experience some slight turbulence and then...explode. -Capt. Mal Reynolds
They overcharged us for tea, now we're overcharging them for Ice-T
Why is iTMS being singled out? The whole thing reeks badly. Conspiracy theorist in me thinks that there are companies behind this call for probe.
Consider these 3 paragraphs from a Reuter article
- Targeting iTunes is an odd choice. In Britain, Apple's music service is cheaper -- in some cases more than 20 percent cheaper -- than rivals Napster and most of the online retailers that resell the catalog of music download firm OD2.
- Graham Vidler, head of policy for the Consumers' Association, said he was not aware of a single complaint from a British consumer about Apple's pricing scheme. "What we are saying is we believe iTunes could be made cheaper," he added.
- The Consumers' Association said it had no plans to investigate the pricier download services.
Basically, they summarized that consumers did not feel ripped off by iTMS and yet TCA called iTMS a rip-off. There are other music services with much pricier songs, but they are not rip-offs; iTMS is. Instead of praising iTMS lower price, they called for a probe with words such as "rip-off" while ignoring the pricier download services.
TCA totally ignores that Apple licensed the songs from the labels which is different from a country to another. Price difference may be the result of the British labels' greed and judging from other services, that is the case. Tell me I am paranoid, but I bet if you look carefully who's behind the complaint, you'll find Microsoft or Napster or the likes of them.
As a Brit and thus, out of obligation/duty/whatever and due to inclement weather, a bitter cynic, I can only laugh derisively at this news and observe that this is the way it always was, is and forever will be.
:s
Some here have failed to grasp VAT - I can only assume that these people are communists, unfamiliar with taxation systems and the exchange of money for goods. (And, as an aside, should the HUAC get wind of this - you know, harbouring socialists and what have you - CowboyNeal can expect the FBI on his ass. Metaphorically speaking, of course.)
Others note a strong pound juxtaposed against a weak Euro or dollar, placing their faith in the fluctuation of international currency to balance the situation. I await with some glee the comedown of the pound - in the dollar's case, this necessitates a change of president, I believe, and, alas, in the Euro's case, nothing short of a blue moon.
The thing is, the UK is fundamentally different from the rest of Europe, a state of affairs brought about more by geography than anything else (the Japanese are similarly afflicted). It will not change. To cite two factors - VAT is lower than the French rate of 19.5% or the Italian one of 20% (if memory serves - corrections welcome) and employment legislation is more company-friendly (contrast our 48 hour working week with France's 35 and note that the Netherlands' figure is similar) - and yet British prices still manage to consistently exceed their continental equivalents - cars have always been a stellar example.
None of this matters though. Britain is, perhaps by statute, more expensive than pretty much anywhere else - this cynic includes Japan in that sweeping generalisation having had ample opportunity for comparison. In fact, it is surprising that this has got as far as the OFT - normally the Beeb is only able to whet the skeptic's appetite for feeling hard-done-by with stories of complaints by consumers' rights organisations.
Nothing will change.
iqu
(If you like my cynical tone, feel free to read my sometimes-updated blog.)
Actually, there are two very possible reasons why a digital download would cost different amounts to send to Germany or the UK.
First off, any form of taxation on the product could very well be different between the German and UK markets.
Second, distribution rights are frequently not 'universal.' It's normal for the rights to distribute some form of IP to be limited in scope to specific regions. It would at least be theoretically possible for Apple to be charged different amounts for the rights in the UK as opposed to Germany...
That said, the article itself doesn't directly address either of those possibilities, however the general impression the article gives(as well as the phrasing of Apple's reply) implies that it is probably a case of Apple pricing relative to the competition by choice. Still, the main point is the costs of sending a digital download to different countries is not always the same since there are significant factors in the price above and beyond the simple case of 'how much does the server/bandwidth cost.'
I can't believe what I'm reading here. Some important facts haven't come up in the discussion thus far:
To sell things in the E.U. there are certain rules you have to obey. As it stands, Apple are clearly not obeying those rules, and so they will lose any legal action which arises. The problem is not that the tracks in the U.K. store are too expensive, but that Apple are actively preventing U.K. consumers from buying tracks from the French store or the German store.
A company providing goods or services in one E.U. country is not allowed to prevent purchases from people in another E.U. country. This principle of the Common Market exists in E.U. law, and this applies to all those countries which are members of the EU including those which, like the U.K., have not adopted the Euro currency.
To obey the law, Apple must allow people in the U.K. with a U.K. credit card to purchase songs from the French or German stores (or people in France, should they wish to, to buy from the U.K. store, for example).
They do not need to allow anyone in the E.U. to buy from the U.S.A. store. Any price comparison between Europe and the U.S.A. is bogus as far as this discussion is concerned. It is not at issue here because the E.U. rules do not apply to the U.S.A. sales operation.
Apple are being targeted because they have stores selling to the U.K., France and Germany, where the E.U. internal free trade rules apply.
(My guess is that the record companies are charging more for the rights to distribute the music in the U.K. than elsewhere. This may also be illegal under the same rules. However, I don't suppose Apple want to take the music companies to court, lest they in turn revoke Apple's right to distribute anything... 'tis a sticky situation, and no mistake.)