EU Could Take Bite Out Of Apple

Apple faces a £330 million fine from the European Union because its iTunes music download service charges more in the U.K. than in mainland Europe.

It’s an issue that drags in all the major record companies as Brussels has already formally charged Apple along with Universal, Warner, EMI and Sony BMG with breaking European competition rules.

The European Union’s monopolies authority believes that the agreements between them, which form the basis for the sale of songs through iTunes, restrict competition and are illegal.

"Consumers can only buy music from the iTunes online stores in their country of residence and are therefore restricted in their choice of where to buy music, and consequently what music is available and at what price," said European Commission spokesman Jonathan Todd.

Apple and the record companies have a couple of months to present a written defense.

The European Commission has also issued a formal objection to the way the digital music retailer and the maker of the iPod is charging 79p in Britain and euro 99 elsewhere on the continent.

On current exchange rates, the continental price is 67p.

The story, which The Times broke April 3rd, took the gloss off a major announcement that the company is to sell iTunes tracks free of digital rights management (DRM) protection.

The commission’s objections focus on Apple’s practice of making consumers buy songs from the iTunes shop in their home country.

The announcement of the agreement with EMI over protection software shows Apple is taking further steps to dampen the regulatory pressures resulting from the way it has sold its successful iPod and iTunes download service.

Companies found in breach of competition law face a fine of up to 10 percent of annual turnover, which would run out at about £323 million in Apple’s case.

The announcement of the sale of premium-quality digital tracks free of anti-piracy controls was seen as a "reckless and desperate" gamble by EMI’s competitors. It’s also been interpreted as another of EMI chief exec Eric Nicoli’s ways of fending off a possible takeover by Warner Music.

The U.S. company supports the publishers and copyright owners’ rights to control access to or usage of their material through DRM technology.

"The best way to combat illegal traffic is to make legal content available at decent value and conveniently. Consumers tell us they would be prepared to pay a higher price for a piece of music they can play on any player," Nicoli said.

Articles on EMI’s corporate future are turning up again in the national media, with the April 1st edition of the Observer reporting that Jim Fifield, one of the company’s former bosses, and his team of private equity backers have given up on the idea of making a bid.

While there was a possibility of an offer from Fifield’s camp, Nicoli did at least have another tool to lever up any new bid that may be forthcoming from Warner.