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EU Launches Antitrust Probe Into iTunes
Macthorpe writes "ABC News is reporting that the EU has started an antitrust probe into the way that Apple sells music on iTunes. As you can only purchase from the store of the country where your credit or debit card is registered, the price differences and availability differences between iTunes stores for different EU countries constitute a violation of EU competition laws which forbid territorial sales restrictions.'Apple spokesman Steve Dowling said Monday the company wanted to operate a single store for all of Europe, but music labels and publishers said there were limits to the rights that could they could grant to Apple. "We don't believe Apple did anything to violate EU law," he said. "We will continue to work with the EU to resolve this matter."'"
That should be,
Realizing that the UK is getting ripped off yet again the EU tries to do something about it
thank God the internet isn't a human right.
Region coding, DRM, lawsuits...they are all just desperate ploys--putting fingers in the dike of inevitable change.
SJW: Someone who has run out of real oppression, and has to fake it.
Oh, the EU has fined so many companies for price fixing, I don't even know where to begin--Bayer & Chemtura, Siemens, Dow, escalator firms, Heineken, Aventis, animal feed companies, the Deutsche Post, many vitamin producers, Nintendo and, of course, the well known case of Microsoft.
...
I'm not saying that none of these fines are unjustified but I am saying that, if I may opine, the EU has been issuing a lot of fines. With this recent Apple one, it does seem as though Apple had no choice and if they aren't given an alternative to losing their contracts with record companies for the sake of running one Europe encompassing store, then I don't blame them. On the surface, the EU Commissions seem to be discouraging big businesses from selling things like XBoxes, PS3s or iTunes inside all of the countries. Is this a good thing or a bad thing? I guess time will tell
My work here is dung.
For once the EU seems to be applying one of the more useful laws they made. It always seemed wrong to me that you could blatently discriminate customers on the basis of their nationality. I don't think a judge is going to buy the "record labels made me do it" defence. IANAL, but I just cannot see how that's going to be an excuse.
I wonder if the WTO could also go after them for charging different prices to US and non-US customers. I know there are many other web stores that do that so that's probably allowed. I understand why a marketeer would like to have different prices for different areas but it is just hampering price transparency and free trade.
Within the US would you be allowed to charge someone from, say, NY a different price than someone from NJ? (apart from tax & shipping?) Would any US judge care if you said the record labels made you do that? I think they just price differentiated because they thought they could get away with it.
This sig is just as redundant as the rest of this posting
I prefer a free market where politicians are bought and sold through the natural will of the market.
But "They told me I had to do it like this" doesn't really sound very compelling. You do business on foreign soil according to the laws of the land, and if the laws of the land say you can't change the availability of your product based on locale then don't just hide behind the music industry's rhetoric in order to make a quick buck. Do the right thing.
Also, fuck the RIAA.
UK iTunes customers currently pay 79p per track. That's the equivalent of around $1.50.
DVD zoning puts all of the EU in one zone, so it doesn't violate EU rules.
It's nothing to do with developing a competitor. Ever since the EEC was founded by the Treaty of Rome, there have been a series of binding legal agreements on member states to enforce free trade. With a few minor exceptions, it is illegal for a member state, or an organisation operating inside the EU, to create barriers against the free movement of people, goods or services. Differential pricing can be seen as an impediment to free trade between members and therefore falls under the remit of EC Law (EEC, EC and EU - yep it's complicated).
If there is thought to be a case against Apple and the record companies then the EU Commission can refer the case to the European Court of Justice for a decision. If they are found to be in breach then the EU has the power to impose penalties on the companies.
That's good, since it means consumers aren't being taken advantage of.
Bloody clever, you fucking bastards...
What Apple has been doing with iTMS in Europe is so flagrantly in breach of the principles underlying the single market I'm frankly amazed it's taken the commission this long to get round to investigating them. I'd love to know who's been giving Apple their legal advice - I assume they're going to try to run an argument that they're providing a service rather than selling goods and therefore aren't caught in the single market rules - and will be very interested to see how this one turns out. We've not had a good free movement of goods case for a while...
How is this hard to understand? If I want to buy music in the EU then Company A can't sell it to france for say 99p and then prohibit me from buying from their french store forcing me to buy it in the UK one at £1.29. I can goto france and buy a DVD bring it home and play it on my UK DVD player. Itunes store activily stops me from buying from the French store, its price fixing. Apple can talk about how the music store won't let them, well sorry thats the local law if you cant obey it then you shouldn't be doing it. The EU simply expects Apple to let me use the french store and the frenchies use the UK store, it doesn't expect EU members to be able to access non eu member stores. So I still won't be able to use the USA store, I don't know about you but I think price fixing is bad, this is deliberate price fixing "because the record company's are forcing us" if thats the case I'd expect a anti trust case against the record companies next.
1) Its not about coding. Having different release dates in different languages would be fine, even within the EU.
2) Its not about DRM. Locking to players may or may not be OK in the EU, but its a different issue.
3) Its not about having the same price. No-one says you have to sell for the same price everywhere.
4) Its not about Apple being forced to do things by the record companies. It doesn't matter who wanted it or didn't.
5) It is not the same as buying stuff in Japan and the US, because, you see, Japan and the US are not part of a single market established by treaty and with a transnational body, the Commission, regulating conduct of companies.
What is it about then?
It is unlawful in the EU to restrict imports and exports from one country to another, because that is in restraint of trade and anti competitive. You can sell it for 600 in Germany and 300 in France. But what you cannot do is prevent the Germans from buying the stuff in France.
Consequently, it makes no difference what the record companies or Apple think or say to each other. Apple cannot enter into an agreement to restrict sales from its UK sites to UK cardholders. If it did sign such an agreement, it is unlawful. It will have entered into a conspiracy to commit anti competitive behaviour. Along with whoever it signed the agreement with. They will both be fried for it. If it just did it off its own initiative, only it committed the unlawful acts. If it really did.
So please guys, stop blaming the record companies and exonerating Apple, its all irrelevant. We have, allegedly, one or more parties engaged in anti competitive practices which are unlawful in the EU. If so, one or both are going to get busted. Whoever instigated it is irrelevant.
If you want to get a better handle on it, think violating FTC rules on interstate commerce in the US.
Lars T.
To the guy who modded me down from perfect to terrible Karma - Apple haters still suck
I think you'll find that the labels are the ones that have set the regional limits and pricing standards. Apple is bound by the contracts the labels were willing to negotiate, and the labels didn't want to negotiate liberal contracts when the iTunes stores were first being set up.
Having to run multiple, mutually exclusive stores is probably a dead loss for Apple all around. There's the massive duplication of effort in making each store run and managing the inventories, there's the effort of barring people in one region from using the store for another region, and there's the dissatisfaction from customers who can't get the music they want if it's only for sale in another region.
Apple runs the iTunes store as a value-added service for the iPod. The more music that's available, and the easier the stuff is to obtain, the more value it adds. How could it possibly hurt Apple to run a single store for everyone in the world, with all the music equally availble to everyone?
Given the track records of the players in question, I doubt that an investigation will find that Apple were the ones who went to the negotiating table saying, "hey, let's waste a lot of resources and piss off a lot of customers by making a patchwork of regional stores, offering different inventories at different prices in each one, and making people in one region wait six months longer to get access to their store than their neighbors 50 kilometers away!"
The current way the iTunes Music Store operates with territorial sales is clearly illegal in the European Union which is based on free flow of goods, services and money. This is one of the most fundamental reasons for the existence of the EU.
On the other hand Apple would not be able to run the music shop if they hadn't agreed to operate in this way due to refusal from the record companies.
I assume that Apple knew full well that the current way was illegal and started operating like this anyway. They were either prepared to pay some fines as part of the cost of doing business, or they believed that by the time the EU started fining them they would be in a much stronger position to force the record companies to agree to operate legitimately. The last reason is IMO quite morally acceptable, but still illegal.
The coverage by the Belgian/Flemish national news service says indeed that the price differences are reportedly required by the labels, and that (according to the Financial Times) the probe specifically targets EMI, Sony and Warner, who have two months to formulate an answer. And if the Commission doesn't like their answer, it reserves the right to confiscate 10% of the labels' revenue (from Internet sales, presumably). It doesn't say anything about sanctions against Apple.
Donate free food here
Apple can try to defend itself using other tactics, but invoking the contract with the labels won't stick for sure. The EC regards only how the product is presented to the consumer, it does not deal with how the company came to get hold of it. From the EC point of view, Apple is enforcing regional discriminatory pricing for goods, which is something strictly forbidden by the Rome Treaty.
They can use discriminatory pricing, but they can't forbid me, a Portuguese, from purchasing a song from the German iTMS. Not that I could do that, they speak gibberish out there ;-)
If at first you don't succeed, skydiving is not for you
"Little does he know, but there is no 'I' in 'Idiot'!"
Ask him back about the time the iPod was released if he wouldn't rather have an open format which didn't restrict which player you could play your music on after you bought it, and didn't keep you from moving the music around and I am fairly willing to bet you would get a different answer. Or let people use iTunes more easily with non Apple players... See where I'm heading? No, because when the iPod was released, it didn't support any DRM, and the only thing "locking" you to the iPod was that it was one of the first players that could handle AAC.
Lars T.
To the guy who modded me down from perfect to terrible Karma - Apple haters still suck
Have you ever looked into the situation. It has been years since the EU ordered the different music licensing cartels across Europe to offer a single, pan-european license and those record company groups have ignored them. Now they're demanding Apple charge the same amount in different countries, when Apple pays a different amount in different countries
Yes, I have looked into the situation, but you obviously haven't, since you completely fail to understand what this case is all about. Apple can charge whatever the hell it wants in each individual country. Want to charge the two euros per track in france and four in germany? Fine.
What the commission is complaining about, and what may very well be determined illegal under EU law, is restricting the sale of French priced tracks only to people with credit cards issued in France. That's what the case is about. If iTunes France wants to charge half the German price, that's fine, but they are not allowed to stop people with German issued credit cards logging on and buying tracks. The EU garuntees free movement of goods, services and people between its member states. Shutting out consumers based on where their cards are issued may well be in violation of this.
Now, you may disagree, and think that imposing this restriction is not in violation of EU law. Fine. But you are grossly misrepresenting the situaton by claiming the EU commission wants Apple to charge the same amount in every country.
Incidently, I agree with the commission on this one. I think refusing to process a credit card tranaction because the card was issued in a different EU state is probably a violation of the single market regulations. In the end, of course, that will be for the courts to decide.
"I realise this is not a very popular opinion but it's the truth, and there for needs to be said" -Bill Hicks
Apple know full well that if a contract clause is unlawful, they are under no obligation to abide by it. And it seems pretty clear that any clause the music publishers put in about market segmentation within Europe is unlawful. Their legal guys should have spotted this years back.
Regardless of *why* they're there, the fact is they *are* EU citizens, correct? Plus they were on a UN mission, and the EU loves the UN.
One of the nicer "guarantees" about living in the US is that if you get stranded somewhere, or in a bind, the US Government will do all it can to get you out... regardless of why you were there. Whenever a revolution or violence starts up in some country, the first thing you hear about is how the US is trying to find and evacuate all US citizens to someplace more stable.
If I lived in the EU, and I found that the EU doesn't give a flying whit whether you were captured by extremists or not, I wouldn't feel very confident.
Comment of the year
King Khazunga: You must be very very young my dear.
eldavojohn: Man.
King Khazunga: Man, sorry. What knight lives in that castle over there?
eldavojohn: I'm 24.
King Khazunga: What?
eldavojohn: I'm 24. I'm not very very young.
King Khazunga: Well I can't just call you "my dear".
eldavojohn: Well you could say "eldavojohn".
King Khazunga: I didn't know you were called eldavojohn.
eldavojohn: Well you didn't bother to find out did you?
King Khazunga: I did say sorry about the "very very young my dear", but from behind you looked...
eldavojohn: What I object to is you automatically treat me like an inferior.
King Khazunga: Well I am king.
eldavojohn: Oh, king eh? Very nice. And how'd you get that, eh? By exploiting the workers. By hanging on to outdated imperialist dogma which perpetuates the economic and social differences in our society.
My work here is dung.
This is called "due diligence" to prevent contributory copyright infringement charges leveled against Apple.
The EU garuntees free movement of goods, services and people between its member states. Shutting out consumers based on where their cards are issued may well be in violation of this.So here's the problem. The right to copy a song onto your personal computer in France is considered, under EU law, a different service than the right to download that same song onto your personal computer in Germany because the right to copy it (copyright) is enforced separately in each country. So if Apple did not restrict the sale of a song from the French store to people with a French credit card, then sure a German could purchase the copyright with their German card, but assuming they are in Germany, it would be illegal for them to actually download the song in Germany, because their license to copy only applies in France and they aren't in France.
Your mistake is trying to equate a download with a CD, when those two things are treated completely differently by EU law. Under EU law, you cannot transfer a copyright (download license) in one country to another, while you can transfer a copy itself (CD).
Now, you may disagree, and think that imposing this restriction is not in violation of EU law. Fine. But you are grossly misrepresenting the situaton by claiming the EU commission wants Apple to charge the same amount in every country.The EU commission is bringing charges against Apple for selling what EU law defines as different services, for different prices. The problem is most of the people involved only understand things in terms of analogies, like CDs and don't understand that the problem is with EU law and the recording industry's exploitation thereof. Apple has exactly zero power to solve this. If they did as you suggest, they'd simply be misleading people into thinking they had a legal right to download a song, when they almost certainly did not, and as a result Apple would be liable for damages because of their knowingly profiting from this illegal behavior.
Incidently, I agree with the commission on this one. I think refusing to process a credit card tranaction because the card was issued in a different EU state is probably a violation of the single market regulations.It is entirely probable that it is a violation, technically. The problem is that accepting payments from foreign cards is also probably illegal. The EU has created a situation where selling music downloads online, is probably illegal no matter which way Apple chooses to do business. All of this, however, would be a moot point if the EU would simply enforce their own edict that requires the recording companies to offer to sell Apple and everyone else a single license at a single price that applies across Europe, so that the copyright license in Germany and in France were the same service. Right now, under EU law, they are not.
How exactly is the UK getting ripped off?
There's nothing wrong with being a large part of the market. It's if you abuse that monopoly that deserves prosecution. Like when Microsoft threatened OEMs not to sell competing products on their computers or face raised Windows license fees. Because Windows owned the market, OEMs had to play along.
Apple doesn't do that with the iPod. Stores can sell whatever they want. Consumers have chosen the iPod, and a few Euro-socialists want to feel clever by hating success, as though it's their duty to "even out" the market. Fuck that.
"Sufferin' succotash."
"Wise men talk because they have something to say; fools, because they have to say something" - Plato
Apple can try to defend itself using other tactics, but invoking the contract with the labels won't stick for sure. The EC regards only how the product is presented to the consumer, it does not deal with how the company came to get hold of it. From the EC point of view, Apple is enforcing regional discriminatory pricing for goods, which is something strictly forbidden by the Rome Treaty.
They can use discriminatory pricing, but they can't forbid me, a Portuguese, from purchasing a song from the German iTMS. Not that I could do that, they speak gibberish out there ;-)
But the thing is that Apple want to lose this case. They'd much prefer to run a single store with every song available everywhere in Europe. It's a lot less administration and they don't like having to explain why songs are available in the UK but not in Ireland (no free single of the week for us either).
The record labels mostly don't care either. They get paid either way. It's the distributors that are the ones at fault. If Apple could have they would have started selling music worldwide from day one. It's obvious. Video is an even bigger thing. But Apple had to agree when the labels insisted -- under pressure from the distributors -- to these measures because they couldn't exactly sue the labels while begging them to allow music to be sold online.
This is perfect. If Apple lose they are forced to sell music to people they're not allowed to. Distributors don't really have much place in the iTS model. They're anachronistic middlemen. The EU are now threatening to get rid of their influence. Break out the champagne!
Remember it's the distributors who held up iTS Australia and Japan, even recently. DRM was always an inconvenience to Apple. It's fundamentally a restriction and it can only decrease the user experience. The fact that they find DRM distasteful is why they're far and away the best at selling it. With Apple it's always been about as little restrictions as they can get away with.
the more they over-think the plumbing the easier it is to stop up the pipe
Thank goodness for an informed comment. EC laws are complex, but no more so than eg the complexities following from the US Constitution's commerce clause. But it's actually even a bit more complex than this.
1) The Commission has now confirmed that their target is not Apple, but the labels, but Apple has to be joined to the case, because it is the supplier/agent of the labels.
2) This is indeed a single market issue. It is not illegal to sell products at different prices in different EU states, but any EU resident has the right to buy that product in any of the states, if they pay the local rate of value-added (ie sales) tax (VAT), and for their own use (ie not for commercial resale), and import it into his own country without further tax. (There are separate arguments over whether a pickup full of French bought wine coming into the UK can possibly be for non-commercial personal use, but the principle is clear, and clearly covers buying a few albums of down-loaded music). I can buy CDs by mail order in France and have them posted to me by the retailer. And it has absolutely nothing to do with DRM.
3) In principle therefore, iTunes should be able to have a single EU wide operation, based in any EU country, paying VAT at the local level, and corporate taxes to the local government. As noted above, they have in fact located the iTunes Europe operation legally and corporately in Luxembourg, but the actual operations (servers, content handling, promotional activities such as free or advance downloads etc) could easily be somewhere else: Luxembourg has a long history of lawyer-led company registration.
4) But the different countries in the EU still operate different rights management systems, and the labels treat them as different markets and have presumably refused Apple the single store option, leaving them between rock 1 and hard place 1: if they were to sell at all in the EU, they had to do it on a country by country basis. That might have been OK (in EU terms) if they had allowed me (in the UK) to buy a record by a Galician folk-rock bagpiper not released on their UK store from the Spanish one, but their credit card handling processes (in the same way as for a Canadian trying to buy from the US store) in practice block me. Whether that was a careless carry over of the existing North American model, or the result of specific pressure from the labels, only access to the emails will tell. Possibly it was a trap set by Apple for the labels, to provoke just the Commission action we are finally seeing, to give them the benefits of a single operation, and cutting out some of the overhead on what we all are told is at best a marginally profitably operation.
5) So a simple answer may be simply for the Commission to order Apple to accept any EU credit card in any EU iTunes store. This would do for me. And may be the initial ruling from the Commission, against which the labels and or Apple would have to appeal, but could have no obvious grounds for doing.
6) But the big fish for the Commission is probably the single market in recorded music rights, which would inevitably lead to similar provisions for performing and broadcasting rights. This could be more controversial, in part because it might trigger the French national neurosis about protecting their cultural/linguistic special status, and the right to subsidise French artists, and to insist on a certain proportion of French-produced content on radio and TV. And as noted somewhere above, it's not a long way then to film and other video rights. That promises to be a real earner for the lawyers, and to take a pretty long time.
IANAL