European Regulators Move Against Apple's iTunes Sales

LONDON — Just a day after Apple Inc. and EMI concluded a deal that would allow the British music publisher to make some of its content available on-line to users of the iTunes platform without antipiracy protection, Apple, and several music publishers, have been hit by a European Commission investigation.

The EC's antitrust probe alleges that the deals underpinning the sale of music through the iTunes Store violate competition rules. The Commission said Tuesday (April 3) it had sent a "statement of objections" to Apple and "major record companies." These are understood to include Universal, Warner, EMI and Sony BMG.

The Commission's main concern is that iTunes' set-up in the European market prohibits users in one country from downloading music from a website intended to serve another. Its move was triggered by a complaint from Which?, the U.K. consumer organization, criticizing the fact that British consumers are charged more by Apple for downloads than many of their European counterparts.

In response, Apple said it had always wanted to operate a pan-European iTunes store "accessible by anyone from any member state" but was advised by music publishers that there were legal limits to the rights they could grant. "We do not believe the company did anything to violate EU law and we will continue to work with the EU to resolve this matter."

The Commission stresses the investigation is not about allegations that Apple is in a dominant market position, nor not about Apple's use of its proprietary Digital Rights Management (DRM) to control usage rights for downloads from the iTunes on-line store.

Yesterday's deal between Apple and EMI relate to that, unrelated, issue.

Instead, it focuses on complaints that agreements between the music publishers and Apple violate the EU treaty's rules prohibiting restrictive business practices. The Commission also points out that its allegations had nothing to do with the lack of interoperability between the iTunes format and rival players.

Last month there were fears that the Commission would consider forcing Apple to unbundle the link between its iTunes on-line music store and the iPod music player.

This followed an interview in which EU consumer protection commissioner Meglena Kuneva was quoted as saying "something has to change" in the way Apple has linked the two such that tracks bought through iTunes will only work on iPods.

The Commissioner has since stressed that she was speaking in a personal capacity and the Commission said there are no such plans at the moment.

Apple and the other companies contacted will now have the chance to defend themselves against Brussels' antitrust probe in writing and if requested during a hearing.

Statements of objections are a formal step in European antitrust investigations. Only after having heard the company's defence can the Commission take a final decision, which may be accompanied by fines of up to ten per cent of a company's worldwide annual turnover.