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UK iTMS Violating EU Competition Rules?

edesignuk

Moderator emeritus
Original poster
Mar 25, 2002
19,233
2
London, England
iTunes under fire over UK pricing

Apple's iTunes music download service has been accused by the Consumers' Association of overcharging UK users.

The group accused the service of charging UK-based customers nearly 20% more than those with addresses and payment details in France or Germany.

The group has written to the Office of Fair Trading (OFT) asking it to investigate iTunes for possible breaches of EU competition rules.

Apple UK told the BBC it had no immediate comment to make.
Full article.
 

garybUK

Guest
Jun 3, 2002
1,466
2
Just beat me to it........ seems like this could be a result for us, I didn't think 79p a track was all that bad, but its true they are charging us more than France/German and this isn't fair.

And before people start moaning that we don't have the Euro currency yet, can apple not set the prices with the exchange rate?? many shops here take Euro's and manage to do it just fine.

Personally I havn't downloaded anything from iTunes because for £2 more I can get the full cd with far superior sound quality and can rip it to any format I like.
 
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Savage Henry

macrumors 65816
Yeah I was just reading that article.

Everything is more expensive in this country, price of cars, cost of fuel, house prices, cost of corned beef ... everything .... I've learned to live with it and got over it.

Considereing the download market is still barely hovering around the 1% region of the market, can't the Consumer Association do something about the extortionate pricing of CDs that they've been promising for years?
 
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Badradio

macrumors 6502
Aug 19, 2004
408
0
Manchester
It's even more unfair when you consider that almost all of the good music comes from the UK. Selling our talent back to us... :p
 
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MacRumors

macrumors bot
Apr 12, 2001
51,524
13,159
The BBC reports that the UK Consumers' Association is looking into allegations that prices are higher for the UK localization of the iTMS than they are for either the French or German localizations. The group has written to the Office of Fair Trading to investigate a 20% higher rate per downloaded track in the UK compared to either of the other two stores.

Apple has defended their UK pricing policy, stating that the underlying economic model in each country has an impact on cost-per-track for each localization. The comparison shouldn't be made between each localization of the store, but instead should be made to other per-track download options available in the UK.
 
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centauratlas

macrumors 65816
Jan 29, 2003
1,358
2,191
Florida
If the EU wants to get involved in the private business of a company, Apple should just get out of the rest of the EU. Talk about a bunch of busy-bodies wanting to tell the rest of the world (and the UK) how to conduct their business.
 
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gaomay

macrumors regular
May 28, 2002
116
0
Scotland, UK
centauratlas said:
If the EU wants to get involved in the private business of a company, Apple should just get out of the rest of the EU. Talk about a bunch of busy-bodies wanting to tell the rest of the world (and the UK) how to conduct their business.

Ummmm the UK is part of the EU, so it actually is their business.
 
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MOFS

macrumors 65816
Feb 27, 2003
1,233
199
Durham, UK
centauratlas said:
If the EU wants to get involved in the private business of a company, Apple should just get out of the rest of the EU. Talk about a bunch of busy-bodies wanting to tell the rest of the world (and the UK) how to conduct their business.

EU? Where? Nowhere in this article does it mention the EU - the OFT is run by the British government.

To be honest, as a Brit, all you can say about this is that the people doing this investigation have a point. The only thing you can say bad about this is why they're just attacking the iTunes music store on this, when the rest of Apples's product lines is in exactly the same boat - not forgetting the vast majority of the electronics multinationals. This is a case of rip-off Britain (again), and this is the first time I've seen anyone take a stance against this in the news, apart from when Tesco's tried to sell cheap Levis... :(
 
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edesignuk

Moderator emeritus
Original poster
Mar 25, 2002
19,233
2
London, England
centauratlas said:
If the EU wants to get involved in the private business of a company, Apple should just get out of the rest of the EU. Talk about a bunch of busy-bodies wanting to tell the rest of the world (and the UK) how to conduct their business.
Course, it's not like America would ever consider telling others what they should/shouldn't, can/can't do :rolleyes: Those EU boys have got a nerve, haven't they!? :p

The Consumers' Association are looking out for my interests by raising this with the EU (which we are a part of), why should I have to pay more than my EU counterparts? :mad:
 
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davey-nb

macrumors regular
Jun 23, 2003
112
0
NORTH America
Singled out for bad press???

This from Reuters:

"Targeting iTunes is an odd choice. In Britain, Apple's music service is cheaper -- in some cases more than 20 percent cheaper -- than rivals Napster and most of the online retailers that resell the catalog of music download firm OD2.

As a result, iTunes sold over 450,000 downloads in Britain in its debut week, propelling it to what is widely believed to be a substantial market lead over rivals.

The Consumers' Association said it had no plans to investigate the pricier download services."

Conspiracy anyone??
 
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ssamani

macrumors regular
Nov 20, 2002
100
11
UK
centauratlas said:
If the EU wants to get involved in the private business of a company, Apple should just get out of the rest of the EU. Talk about a bunch of busy-bodies wanting to tell the rest of the world (and the UK) how to conduct their business.

Erm... actually its quite a very good thing from a consumer point of view. Basically the EU is supposed to be a free trade area. In other words I should be able to cross the border from France to Germany as a UK citizen and be able to buy anything legal in Germany that I could buy in the UK or France. I will pay local taxes, e.g., VAT, and then take that to the UK without having to pay any import duty. I should be able to do this on the web aswell. So for example I was able to buy a BlueTooth adaptor for €20 with free shipping (to Germany) from Amazon.de, even though it was £23 plus shipping from Amazon.co.uk. Now I could have paid for delivery from Amazon.de to the UK, but it wouldn't have worked out cheaper and I was in Germany with work anywya.

Apple does not allow me to buy music from iTunes Music Store in Germany to take advantage of favourable FX rates and taxes. It is effectively locking me into higher prices in the UK. If they can show that this is due to highter VAT or other taxes, they will not be told off for setting different prices, but they must allow me access to the German and French stores. They will not loose out because they will be passing on the VAT to the customer. However the price hike is probably not due to VAT (France, Germany and UK don't vary that much- UK 17.5%, Germany 16%) it is due to Apple effectively fleecing UK customers who are a bit more keen on the iPod and iTunes and they can get away with charging more.

A fair playing field across the EU is what is intended. Obviously it is a little unfair on companies that they get hit by FX rates this way, hence the Euro. At the moment they also have to deal with tax competition between countries, e.g., Eire dropping corporation tax to attract investment. So some leaders in the EU want tax harmonisation as well - however like the good old Boston Tea Party, Europeans don't want taxation without appropriate representation - the European Parliament is a toothless body that would not currently get responsibility for setting taxes. Hence why it hasn't happended.

I would much rather the EU protected consumer's rights than business rights. This is a very good thing.
 
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theahnman

macrumors member
Sep 8, 2003
35
0
Annandale, VA
Brits and Apple

Haha looks like the Brits have really got Apple in their sights. First the Apple Corps thing, and now this. Wonder what's next for the EPIC STRUGGLE between Apple and the UK.
:p
 
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ssamani

macrumors regular
Nov 20, 2002
100
11
UK
davey-nb said:
This from Reuters:

"Targeting iTunes is an odd choice. In Britain, Apple's music service is cheaper -- in some cases more than 20 percent cheaper -- than rivals Napster and most of the online retailers that resell the catalog of music download firm OD2.

As a result, iTunes sold over 450,000 downloads in Britain in its debut week, propelling it to what is widely believed to be a substantial market lead over rivals.

The Consumers' Association said it had no plans to investigate the pricier download services."

Conspiracy anyone??

The question is
a) does the price for Napster UK vs Napster France differ once FX rates are taken into account
b) more importantly can you purchase music from Napster France from Germany or from the UK

Napster can charge more in the UK than iTunes if they want, but they need to be charging an equivalent amount in Euros in France and Germany (do they have a store in France or Germany?)
 
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techgeek

macrumors member
Jun 11, 2004
94
0
UK
centauratlas said:
If the EU wants to get involved in the private business of a company, Apple should just get out of the rest of the EU. Talk about a bunch of busy-bodies wanting to tell the rest of the world (and the UK) how to conduct their business.

Well the UK is part of the EU, just not part of the single currency (Euro zone).

I've been wondering about how the localised itms work acctually (legaly speaking) since there is suppose to be a single EU "market". That was the original point of the EU. The Common Market became the European Economic Community (EEC) became the European Community (EC) became the European Union (EU).

Maybe I just don't understand it all :confused:
 
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vienna

macrumors newbie
Jul 17, 2004
15
0
Raleigh, North Carolina
It will be interesting to see if the justification for the slightly higher price is that the record companies in the UK take more in their cut of each song sold when compared with mainland Europe.

I'm a Brit who currently lives in the USA, but I agree that there are far more prevalent cases of British people being over charged than the miniscule online music download market (and even then only Apple's segment of it).
 
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Dunepilot

macrumors 6502a
Feb 25, 2002
880
0
UK
Different costs?

Of course, it is possible that the overheads in the UK are different (it depends on whether Apple actually has a physical presence to support the UK iTMS - higher cost of premises and other infrastructure, higher wage rates and so on could all contribute towards a higher end price for the UK consumer).

I also wrote last week to drowned in sound , the fanzine that has now started its own label, asking them whether their stuff would be on the iTMS, and was told that they may do it soon, but that their share of the profits from doing that would be very low.

We all know how the indie labels balked at this situation until Apple offered them a better deal, but if the consumer track-by-track prices were to fall, it seems unlikely to me that little labels like this would sign up to the iTMS as the profit margin for them would no-doubt shrink further. If reports are to be believed, Apple isn't exactly raking in profits from the iTMS, as it's rumoured to be there primarily to push sales of iPods.

I don't know what my conclusion from all of this is, but it does seem like things are quite closely balanced at the moment, and a push from consumer groups of this sort might not actually help to increase the catalogue of music available on the store. I, for one, like the convenience of the store a great deal, but there are only a handful of bands whose music I've bought from the iTMS so far (Hundred Reasons, Yourcodenameis:milo, The Get Up Kids), simply because my tastes aren't yet very well represented.

Off-topic: Why aren't At the Drive-In on the iTMS yet??!!??! EMI own Grand Royal according to The British Library Sound Archive, so their last album should at least be available.
 
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Sabbath

macrumors 6502a
Sep 18, 2003
534
0
London
I think the first thing to take into account is exchange rate variation, we in the Uk don't use the Euro so Apple needs to establish a long term average rate at which it feels the exchange rate will stay. As changing prices with the exchange rate changes is not going to be popular with customers who see the nominal (and to them real) value of their tunes increasing, while apple would be holding their real value (in dollars, although this is not strictly true as costs are likely to be in local currency but the real vlaue of profits is in dollars) constant but increasing the nominal price in pounds. So I think the first thing to consider is a relatively stable long run level of sterling (£) Euro exchange rate. If Apple considers the pound is currently overvalued compared with the Euro then such a pricing policy is acceptable. Otherwise we could see intervention forcing the price down to the Euro level and then if the pound weakening relative to the Euro the Euro price forced down to the pound level, such that Apple keep getting less and less in real value.

I think the reason this has been jumped on is as the store is a virtual one it is easier to calculate costs for different regions. When you consider physical businesses there are many more costs to consider for example the cost of premises and staff which vary widely across economies. There is probably little difference between the cost in either area, especially as the whole store is based in luxembourg, and as such they can't argue the economic model in each country has an effect. That is unless Apple is paying much more for the license to sell songs in the UK, I am unable to make an assumption about this due to my lack of knowledge of the the record industry structure across the three regions.

To those who say the UK (or EU) doesn't have a role in the business of an American company, I would have to disagree. If Apple is making greater profit per song in the UK in the long run (ie therfore excluding exchange rate variations) then welfare in the UK will be lower. This is due to a reduction in consumer surplus of the individuals in the UK who purchase at a higher price, and those at the margin who do not purchase at the Uk price but would of at the Euro price. The surplus lost on consumers forced to pay a higher price is accrued to apple as profit and hence transferred out of the UK (EU). The surplus lost by those who do not buy at the higher price is lost full stop. So consumers and Apple together would be better off at the lower price but Apple alone would be worse of. As both are better off together this poicy would also be applied to a UK (or EU) company acting in the same manner and hence does not violate WTO national treatment rules.

The process is merely one of stopping a company (or companies combined as a cartel) using its monopoly power to charge excessive prices and make excessive profits at the expense of consumers. The problem I see is the ease in comparing prices and costs across the EU which is supposed to be a single market, and therefore it is difficult for apple to get away with price discrimination, if that is what it is. The problem is consumers in the EU should be able to take part in arbritrage to equalise prces but as you must have a billing address in the country to buy from iTMS this is difficult.

Doubt anything will come of this due to exchange rate considerations, but I wonder what would happen if someone challenged Apples right to only sell certain things at certain price to people from certain regions within the single market.

Sorry a bit long a messy but hopefully points out the reason for intervention.
 
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vienna

macrumors newbie
Jul 17, 2004
15
0
Raleigh, North Carolina
techgeek said:
Well the UK is part of the EU, just not part of the single currency (Euro zone).

I've been wondering about how the localised itms work acctually (legaly speaking) since there is suppose to be a single EU "market". That was the original point of the EU. The Common Market became the European Economic Community (EEC) became the European Community (EC) became the European Union (EU).

Maybe I just don't understand it all :confused:

I imagine that the different record companies are not willing to allow distribution of their music across borders. It must be easier for Apple to have a single store instaed of three (or four if you incude the US store), so the mutiple store fronts must be a compromise on Apple's part to the record companies.

Certainly I'd like there to be one world wide store where I could buy music from any county but it doesn't look like that is going to happen any time soon.
 
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Dunepilot

macrumors 6502a
Feb 25, 2002
880
0
UK
ssamani said:
... However the price hike is probably not due to VAT (France, Germany and UK don't vary that much- UK 17.5%, Germany 16%) it is due to Apple effectively fleecing UK customers who are a bit more keen on the iPod and iTunes and they can get away with charging more.

A fair playing field across the EU is what is intended. Obviously it is a little unfair on companies that they get hit by FX rates this way, hence the Euro. At the moment they also have to deal with tax competition between countries, e.g., Eire dropping corporation tax to attract investment. So some leaders in the EU want tax harmonisation as well ...

I don't see how tax harmonisation can occur any time soon :- we in the UK pay a very different amount of direct tax (e.g. income tax) than we would in the main European states. Plus our property prices are really quite different from theirs. Taxation systems in this country being out-of-sync with much of Europe seems to me to be a major reason why we won't be going into Euro-land for some time.
 
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Some_Big_Spoon

macrumors 6502a
Jun 17, 2003
855
0
New York, NY
Who do you think probably complained? not the consumers, but the lables/distributors/MS.. Everything is more expensive in the UK, and I'm guessing there's gigher fees involved with the iTMS.. this is FUD, plain and simple.



Savage Henry said:
Yeah I was just reading that article.

Everything is more expensive in this country, price of cars, cost of fuel, house prices, cost of corned beef ... everything .... I've learned to live with it and got over it.

Considereing the download market is still barely hovering around the 1% region of the market, can't the Consumer Association do something about the extortionate pricing of CDs that they've been promising for years?
 
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voodoofish

macrumors regular
Jan 6, 2004
180
3
London
Savage Henry said:
Considereing the download market is still barely hovering around the 1% region of the market, can't the Consumer Association do something about the extortionate pricing of CDs that they've been promising for years?

True, but I think the point is there is nothing to stop us from importing CDs from any other EU country, but the iTMS will only yet people with a credit card from the country the store is for use that store. When the EU is supposed to be all free trade between members etc. then that could be seen as illegal. However, the reasons iTunes is setup like that is because of the fact that music isn't liscenced for EU-wide distribution, but is done country by country, and that is why there are only UK, French and German stores as each country's distributers need their own separate agreement with Apple.

So really it isn't Apple's fault, but I think pan-European lisencing deals should be mandatory so it would aid the distribution of music (as, for example, Apple would only have to strike a deal with one distributor for the whole of Europe).
 
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Sabbath

macrumors 6502a
Sep 18, 2003
534
0
London
ssamani said:
Apple does not allow me to buy music from iTunes Music Store in Germany to take advantage of favourable FX rates and taxes. It is effectively locking me into higher prices in the UK. If they can show that this is due to highter VAT or other taxes, they will not be told off for setting different prices, but they must allow me access to the German and French stores. They will not loose out because they will be passing on the VAT to the customer. However the price hike is probably not due to VAT (France, Germany and UK don't vary that much- UK 17.5%, Germany 16%) it is due to Apple effectively fleecing UK customers who are a bit more keen on the iPod and iTunes and they can get away with charging more.

I'm wondering if there is a different level of VAT charged, I'm not certain over EU tax law on digital products. But if the store is based in Luxembourg, should it not just be a case of paying the VAT there (which I believe is one of if not the lowest in the EU) and then effectively it is shipped (transferred) to me in the UK tax free. Just as if I bought a cd in Luxembourg I would be able to pay the local sales tax and not have to pay VAT. I wonder if buying from iTMS in the UK equates to buying from a UK shop or a Luxembourg shop in terms of sales tax.
 
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Stella

macrumors G3
Apr 21, 2003
8,562
5,475
Canada
centauratlas said:
If the EU wants to get involved in the private business of a company, Apple should just get out of the rest of the EU. Talk about a bunch of busy-bodies wanting to tell the rest of the world (and the UK) how to conduct their business.

And this is coming from a yank.... look at your country first and see how it throws it weight around the world...

@Badradio
That is why the UK is still "Rip of Britain "because people carrying on buying the over charged.. Maybe if there were protests /boycotts companies would think again.

The British should protest like the French.. french protesting is *very* efficient and effective. At least they care enough to protest (yes, it does cause a lot of problems especially at ports etc).... and a few burning sheep ;-)

--
To be fair to Apple, iTunes pricing has a lot to do with record companies so maybe they should be invested (yet again) along side iTMS.
 
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voodoofish

macrumors regular
Jan 6, 2004
180
3
London
centauratlas said:
If the EU wants to get involved in the private business of a company, Apple should just get out of the rest of the EU. Talk about a bunch of busy-bodies wanting to tell the rest of the world (and the UK) how to conduct their business.

um, *hello*, every government gets involved in the private business of every company that operates in their country, there's these little things called laws you see. for example, if one company makes money by stealing stuff from people and selling it on, this is usually illegal. this law is designed to protect private property, considered by most essential to the running of a modern capitalist economy. Competition is also another one of these essential things, and so the EU having competition laws is, in my opinion, no bad thing.
 
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