The European Commission has begun an inquiry into allegations that Apple imposes territorial restrictions on customers buying through its iTunes store and thus forces British consumers to pay more for downloads than their other European counterparts.
The European Commission has sent a statement of objections against alleged territorial restrictions in online music sales to both major record companies and Apple.
Statements of objections are a formal step in European antitrust investigations. After receiving such statements, companies have two months to defend themselves in writing. After having heard the company’s defense, the commission takes a final decision, which may be accompanied by fines of up to 10% of a company’s worldwide annual turnover.
At issue are agreements between each record company and Apple that restrict music sales: consumers can only buy music from the iTunes’ online 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 said.
The regulator alleges in its statement of objections that these agreements violate the EC Treaty’s rules prohibiting restrictive business practices.
iTunes verifies consumers’ country of residence through their credit card details. For example, in order to buy a music download from the iTunes’ Belgian online store, a consumer must use a credit card issued by a bank with an address in Belgium.
As the Daily Mail points out, this system has led to consumers in the UK paying more than the rest of Europe for downloads. Apple currently charges GBP0.79 per track from the British iTunes store, but just E0.99 (GBP0.67) for downloads elsewhere in Europe.
The statement of objections does not allege that Apple is in a dominant market position and is not about Apple’s use of its proprietary digital rights management technology to control usage rights for downloads from the iTunes store.