Brussels, 03/04/2007 (Agence Europe) - The European Commission today confirmed that it has a statement of objections to major record companies and Apple in relation to agreements between each record company and Apple that restrict music sales: consumers can only buy music from the iTunes' on-line store in their country of residence. Consumers are thus restricted in their choice of where to buy music, and consequently what music is available, and at what price. The Commission alleges in the statement of objections that these agreements violate the EC Treaty's rules prohibiting restrictive business practices (Article 81). Apple operates a series of iTunes on-line stores in more than a dozen European countries which sell music downloads, mainly in the eurozone, Denmark and the UK. Jonathan Todd, spokesperson for EU Competition Commissioner, said that songs cost 99 eurocents each in the eurozone but are up to 8% cheaper in Denmark and 18% cheaper in the UK. The sales system checks the customer's credit card address and only allows access to the iTunes server from the member state where the customer lives. A complaint was lodged by the UK Consumers' Association two years ago and the Commission's investigation confirmed that the differences in sales conditions among EU member states is indeed illegal.
Some music industry sources comment that music companies, which hold distribution rights to the music sold by iTunes, have signed agreements with artists but the agreements are national rather than international and it is difficult to imagine a pan-European licence system for the sale of the music in question. Asked about the legality of national agreements with artists, Todd said it was the impact of the deals that was incompatible with EU law, assuming they lead to a variation in prices among member states when sold from iTunes.
Todd did not name names but said that four other major companies were involved alongside Apple, namely Sony-BMG, Warner Music, Universal and EMI. None of the companies in question had reacted at the time we went to press. The European Commission's statement of objections does not accuse Apple of having a dominant position and does not mention Digital Rights Management (DRM). The recipients of the statement of objections have two months to respond in writing, after which the European Commission may impose a fine of up to 10% of the companies' worldwide annual turnover. (cd)