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European Commission Launches iTunes Price Probe
by , 7:00 AM EST, February 25th, 2005
The European Commission (EC) has confirmed it is looking into allegations that Apple's iTunes Music Store (iTMS) discriminates against consumers in Great Britain by charging them more to download the same song than it charges other European music buyers.
EC spokesman Jonathan Todd said the investigation is in "the early stages" and would not give a time frame for when a decision would be handed down.
Apple's pricing policy was brought to the EC's attention in December 2004 by the British Office of Fair Trading, which was itself made aware of the situation by the British Consumer Association, now known as Which?.
In the UK, the iTunes Music Store charges customers 79 pence (euro1.14/US$1.50) to download a single track. The same song costs 0.99 (68 pence/US$1.30) when it's downloaded from Apple's other European music Web sites.
Apple defends its pricing structure saying it is based on market influence and the price it pays for each song in each country.
"The underlying economic model in each country has an impact on how we price our track downloads," Apple said in a statement. "That's not unusual. Look at the price of CDs in the US versus the UK. We believe the real comparison to be made is with the price of other track downloads in the UK."
Which? and the British Office of Fair Trading contend Apple's refusal to allow cross-border shopping is in contravention of European Union laws that stipulate British shoppers should be able to enjoy the same advantages as their European counterparts. But because Apple does not allow those with a UK-based address or credit card to use the French or Germany iTMS sites, those in the UK can't enjoy equal pricing.
Observer Comments
Fri Feb 25, 2005 9:43 am Subject: I can shop in the USA but my dollar is weaker
I have the choice to shop in the US, but I live in Canada. When I'm at my computer, I'm shopping in Canada. I have to pay 15% tax here for my item for most things, yet do I complain?
In most cases, I pay next to no tax and it's cheaper to buy stuff in the US even though the dollar is higher there. If only I could make my salary in US dollars.....
My point is, I'm sure things cost different amounts in Great Britain as opposed to Europe.... they don't use the same currency, even though they are joined by the EU there are differences.
"I have the choice to shop in the US, but I live in Canada. When I'm at my computer, I'm shopping in Canada. I have to pay 15% tax here for my item for most things, yet do I complain?
In most cases, I pay next to no tax and it's cheaper to buy stuff in the US even though the dollar is higher there. If only I could make my salary in US dollars.....
My point is, I'm sure things cost different amounts in Great Britain as opposed to Europe.... they don't use the same currency, even though they are joined by the EU there are differences."
You are sort of right, but I think the point is that in the UK we do have the choice to go across to Europe and buy things cheaper, for example, many people will import new cars from European countries because it is much cheaper.
The ITMS in the UK infringes on this choice and therefore on our rights as citizens of the European Union. We should be able to buy music at the same price as the rest of europe, if we choose to do so. Just because you are purchasing items through the medium of the internet should not change this fact.
I would imagine most people are content to buy music at Ј0.79 a song and the albums on the ITMS are Ј2.00 - Ј3.00 cheaper than buying a CD, which is a bargain in UK shopper eyes.
In general, I think that many Mac users in England feel particulary annoyed that we have to pay so much more for our computers than you do in USA. At current prices and todays exchange rate, to buy the lowest spec mac mini cost $732.56 dollars in England. Why are we paying this extra cost? Why? Why? For the love of god, tell us why?!?
Interesting how Apple's price, after adjusting for "market influence and the price it pays for each song in each country," just happens to end in 9 every time. ($.99, 79p, Ђ.99). Amazing coincidence? No, they're obviously setting prices--at least in part--based on a marketing gimmick.
Fri Feb 25, 2005 10:46 am Subject: Same money, different price
Quotefartheststar wrote:
My point is, I'm sure things cost different amounts in Great Britain as opposed to Europe.... they don't use the same currency, even though they are joined by the EU there are differences.
Yes, but even the countries that share a currency have their own economies, costs of living, rates of taxation etc. Apple still managed to set the same price in each.
However, the issue is not whether Apple has the right to set different prices in different territories - it has, no question - but whether EU law allows it to bar customers in one member state from buying cheaper goods from another.
QuoteGuest wrote:
"In general, I think that many Mac users in England feel particulary annoyed that we have to pay so much more for our computers than you do in USA. At current prices and todays exchange rate, to buy the lowest spec mac mini cost $732.56 dollars in England. Why are we paying this extra cost? Why? Why? For the love of god, tell us why?!?
In a word, taxes.
Consider; if Apple is spanked with extra costs just for selling to consumers in the England, that's not their fault. Blame it on the British government. And since the government is presumably imposing the taxes to fund programmes for the British population, it only makes sense for those people to assume the burden of the taxes, not Apple.
As for the music pricing discrepancy between the U.K. pricing and other parts of the E.U., it wouldn't surprise me in the least if the [British] government held Apple liable for collecting the additional local taxes on anything they sell to folks in England (even if it is via the internet), simply because Apple has a physical presence in England. It would parallel the practice in the U.S. where internet retailers have to collect state taxes on any sales to customers in states in which the company has a "brick and mortar" retail facility, but not in other states.
There's also the possibility that recording groups are charging higher fees for Apple to sell the music in England as opposed to elsewhere. The point is there could be any number of reasons for Apple's pricing, but does anyone actually think Apple is just "sticking" it to England for spite?
"In a word, taxes.
Consider; if Apple is spanked with extra costs just for selling to consumers in the England, that's not their fault."
Even with VAT added to the Mac Mini, the english price should be somewhere around Ј319 / $585.68 not Ј399 / $732.56. I don't think Apple are "sticking it" to the English out of spite, but they are upping the price just because things in England are pricier in general.
If Apple offered computers to the UK market at the same price they charge America, I reckon they would pretty much corner the market in the UK. Getting a Mac Mini for around Ј200 is far cheaper than any PC workstation.
Fri Feb 25, 2005 12:26 pm Subject: If the UK were on the Euro
and had the same taxes they would probably pay the same rate. Going to the Euro, for me, would be a sad day for the UK - but then I'm only a Yank who loves going to the UK.
When people in countries with a VAT look at US pricing they have to remember that our sales tax (or VAT) is applied at the point of sale. Where I live about 9% is added to the price of the goods when you take them to the register - or buy them on line from Apple.
Also when comparing taxes and prices remember that things tend to balance out. I may have a little less taxes to pay, but I pay a few dollars under $1,000 a month for medical insurance for my wife and myself - and dental is not included. Personally I would be very happy to exchange that cost with a slightly higher cost of Apple products.
As for the EU probe - it will keep government employees employed.
I'd be very surprised if the reason Apple doesn't allow UK residents to buy from the FR, GE, and US stores is simply due to the licensing restrictions imposed by the music distributors in each country.
The FR distributors don't want UK residents to buy music from a UK distributor, and visa versa.
If the EU really wants pricing parity and the ability to buy music from anywhere in the EU, THEY have to do something about consolidating the music distributors and removing the trade barriers between EU countries. Apple can't do anything abou that.
I'm sure Apple would LOVE to have one worldwide store that everyone can by from, but the music distribution system is still stuck in an old, outdated, geographic model.
The situation in the UK is that being a non Euro zone member, companies have been exploiting the lack of price transparency between the UK and the rest of Euro land for their own profit. The two main offenders here have been Cars and CD sales.
On the back of this, I suppose it is natural to now look at downloadable music should there be an unfair price difference with the euro zone. At least being an EU member, we can shop around on the continent or the web to get a cheaper price if we feel it is too high. In this case, consumers do not have a choice.
Even though different countries hold the same currency (Euro), tax rates are variable as they are set by their respective national governments.
I agree with the other comments that the geographical nature of licensing restrictions are now outmoded. I sincerely hope companies act to create a more equitable situation, as the CD over pricing debacle has been often quoted as justification to illegally download music, or swapping CDs with friends. Ultimately that would be bad for everyone who believes in a healthy and sustainable music industry.
Being in Belgium I often find on the French store, things I don't find on the Belgian one. And that includes well know Belgian artists, well know both in Belgium and France that is... That's what frustrating me.
In other words, these restrictions (I'm talking about price here, just availability) is simply due to the labels and how they contract artists in different countries.
Seems quite ridiculous when you think Universal has branches everywhere which don't seem to talk together.
QuoteGuest wrote:
Even with VAT added to the Mac Mini, the english price should be somewhere around Ј319 / $585.68 not Ј399 / $732.56.
The English price is Ј339 inc VAT not Ј399 for the basic Mac Mini. The US price is $499 + Sales Tax at (say)8.25% in Chicago where I looked at buying one to bring back. That makes a dollar total of $540. I risk the chance of having to pay tax when I enter the UK with it - the box is small, but I travel light - I must take a bigger suitcase next week and my most honest smile as I travel through customs. Then I need to buy a UK power cord and hope that nothing goes wrong as I don't have a UK warranty.
To be honest, Ј339 looks like excellent value, so I'm buying my Mac Mini in the UK...
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