Democracy & Technology Blog EU targets Apple

European Union regulators think Apple should charge the same price across Europe for users to download content from iTunes. As it now stands, consumers in countries like Great Britain and Denmark pay a few cents more than their neighbors to download songs. Apple has been served with a Statement of Objections (basically an indictment). According to an EU press release,

The Statement of Objections alleges that distribution agreements between Apple and major record companies contain territorial sales restrictions which violate Article 81 of the EC Treaty. iTunes verifies consumers’ country of residence through their credit card details. For example, in order to buy a music download from the iTunes’ Belgian on-line store a consumer must use a credit card issued by a bank with an address in Belgium.

The EU’s best efforts to the contrary, taxation and regulation are not completely uniform throughout the EU — so the cost of doing business may actually differ from one country to another. For example, there are still differences in copyright protection notwithstanding recent efforts to harmonize each country’s copyright law.
The EU says it is not alleging that Apple is in a “dominant market position,” nor is it examining Apple’s use of Digital Rights Management (DRM) to control usage of the songs it sells. My guess is someone in the EU senses political risk. The EU came down hard on Microsoft at the behest of rival software developers (some of whom are European); European cellphone makers are hoping the EU will help reduce the royalty payments they currently pay to Qualcomm; and European semiconductor manufacturers need help, too (click here). Though the complaint against Intel was brought by an American rival, European rivals would also benefit from sanctions against Intel. How many successful American companies can the EU afford to target at once?
The EU may think it can have it both ways. Apple now has separate iTunes stores throughout Europe. When the French Senate and the National Assembly approved a copyright law in June that could force Apple to make its iTunes compatible with rival music players and reducing the fine for illegal downloading of music to “little more than a parking fine,” some noted Apple could just stop doing business in France (see, e.g., this and this. If the EU can pressure Apple to create a single EU-wide store, it would be harder for the company to retaliate against a single country who wants to pursue what Apple called, in the case of the French legislation, “state-sponsored piracy.” The impetus for interoperability in France appears to be driven by consumer advocates, not any notion that interoperable music files will deliver what Europe needs most — jobs and economic growth.

Hance Haney

Director and Senior Fellow of the Technology & Democracy Project
Hance Haney served as Director and Senior Fellow of the Technology & Democracy Project at the Discovery Institute, in Washington, D.C. Haney spent ten years as an aide to former Senator Bob Packwood (OR), and advised him in his capacity as chairman of the Senate Communications Subcommittee during the deliberations leading to the Telecommunications Act of 1996. He subsequently held various positions with the United States Telecom Association and Qwest Communications. He earned a B.A. in history from Willamette University and a J.D. from Lewis and Clark Law School in Portland, Oregon.