Time to eat some crow

by Jeremiah Foster

I blogged the other day about how I couldn't get iTunes to play some of my music. I connected this with the EU's "statement of objection" regarding "territorial restrictions." I wanted Steve Jobs to persuade the record companies that the territorial restrictions were arbitrary and I felt that would solve my problem.

I filed a bug with Apple regarding this issue. They nearly instantly replied that this was not a bug in the engineering sense, the software was behaving as designed, and I needed to reauthorize my account with the email address and physical address with which I bought the music. I changed my settings and the music was authorized. Problem fixed.

I think I acted hastily and blogged when I should have tried to fix my problem through other means. I feel now that I ought to apologize to Apple and to my readers for not being more thorough and accurate. I hereby apologize and prepare for a large helping of crow.

Moreover I am a bit wary of the EU commission's stated goal now upon realization that Apple is not in fact denying legally purchased music to be played in iTunes in different countries.

If their goal is to establish a single price for each song on iTunes regardless of country of purchase, shouldn't they make sure that every country in Europe has an effective method to calculate prices across borders? Isn't that mechanism called the Euro? Why doesn't every country in the EU use it then? Perhaps the countries that do not use the Euro prefer the method of setting prices in their own currency but the side effect is always going to be a price difference in goods and services when currencies get converted. I think the EU does not really have much of a case, at least against Apple.

24 Comments

Rudi
2007-04-04 02:14:05
The case is not against price discrimination but against barriers against free trade - the price of cars and other goods varies among European countries, but countries or companies that try to restrict people from buying something in another country get their wrists slapped by the commission.
Andreas Bachofen
2007-04-04 02:34:50
This has nothing to do with the Euro. It's just a currency. The point is that in every country belonging to the European Economic Area (that's the 27 members of the EU plus Norway and Iceland), you have the freedom to buy anything from another country. This is the basic freedom any customer has in this free market. Denying this freedom to users of the iTunes Store is serious.
The EU has stated that it is aware that Apple is just doing what the major labels allow them to, but nonetheless, it's the iTS that the customers are dealing with and that is denying them their freedom.
James Shiell
2007-04-04 02:37:13
Some countries do not use the Euro as control over one's own currency allows more flexible control of interest rates and hence (hopefully) the economy in general. As demonstrated by France and Germany's violation of the rules shortly after joining.


But that has little to do with free trade. Why can I buy a Wii on Amazon Germany from the UK (or vice versa) yet I cannot buy German music via iTunes? Given exchange rates have nothing to do with these pricing differences, as they're set by negotiation with the local copyright owners, the only apparent answer is that they're enforcing separate market to make more money from certain countries. And that certainly goes against the idea of the common market.

Jochen Wolters
2007-04-04 02:41:34
Why doesn't every country in the EU use it then?


The Euro is used as the "native" currency by more citizens than any other currency (including the mighty Dollar), and thanks to strict regulations set forth by the European Central Bank, it is also one of the most stable currencies. Consequently, there are a number of requirements for a country to adopt the Euro, even if they have already joined the EU. Then there are Sweden, Denmark, and the UK who have expressly decided to keep their original currencies. See "INSTITUTIONAL AND ECONOMIC FRAMEWORK OF THE EURO" on the official Europa website for more on the intricacies of managing a single currency for 25 nations ...


I think the EU does not really have much of a case, at least against Apple.


According to EU regulations, anyone selling products or services inside Europe is legally required to ship to any place inside the EU; you cannot refuse to sell your products based on the customers' place of residency, but that is exactly what Apple does. Why can't I buy from the UK iTunes Store? 'Cause I live in Germany, and that is the only reason for this restriction.


It's this limitation that is at the core of the EU Commission's complaint, and not just the differences in pricing as such — in most European iTunes Stores, a track costs 0.99 Euros; in Denmark, 1.21€ (9Kr), in Sweden 0.86€ (8Kr), and in the UK 1.17€ (£0.79) —, so their case is definitely not without merit.

jeremiah foster
2007-04-04 02:41:55
@ Andreas: That is not exactly true. You cannot buy goods and services over borders for example, (try hiring a Latvian construction worker in Sweden.) You also have substantial regulation within certain markets, like agriculture, which prevents the flow of products from one country to another. The original complaint from Which? in the UK was in fact about the price difference between buying a song in the UK and buying in another country. This is about pricing differences and about the lack of a common market, which the Euro was supposed to solve.
Alberto
2007-04-04 03:04:58
I live in Spain and I can buy books, CDs and DVDs from amazon.co.uk but I can't buy electronics devices, if UE forces Apple to unify iTunes european stores then they must force amazon to do the same.
Jochen Wolters
2007-04-04 03:07:14
This is about pricing differences [...]


Nope, Jeremiah, it is not. The official statement by the EU Commission says: "[C]onsumers can only buy music from the iTunes' on-line 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 EU Commission does not criticize the differences in pricing; they criticize that consumers cannot buy the exact same product at a cheaper price from an iTunes Store in another country because Apple doesn't let them.

Stefan_K
2007-04-04 03:09:51
Besides, there are reasons for different Euro prices of the same product in different countries.
For example, Germany has fixed prices for books and other print media, most other € countries don't.
Furthermore, there are spending capacity differences that have to be taken into account.
And then there are major differences in the VAT percentage, even resulting in different prices excl. VAT. For many people this is a strong reason to buy certain products in a foreign country, re-import german cars from a neighbour country to germany for example.
But there is a big difference in price between a car and an iTunes song...
jeremiah foster
2007-04-04 03:15:23
@ Jochen: I don't understand. How is that not about price?


EU commission quote; "and at what price" and your quote; "they criticize that consumers cannot buy the exact same product at a cheaper price"


To clarify, I mean that the price disparity is what is at issue. Apple has stated that it is forced to do this by the record companies and wants to sell it at the same price everywhere. So why does the EU commission bring Apple into this when the big four are the problem? The record companies insist on different prices in different countries, not Apple. If the Euro were accepted in every country in the EC or EU this would be easier for the EU commission to argue, as it is the barriers to pricing are enforced by certain countries inside the trading bloc facilitating the disparity in pricing. Hence me saying this is all about price - and I think your quotes back me up here.

Jochen Wolters
2007-04-04 03:31:06
Jeremiah:


The tax systems in the EU member states are (sometimes dramatically) different from each other, e.g., some countries impose a "luxury tax" on expensive cars, VAT rates are different, etc. Therefore, it is basically impossible to require that a specific product be sold at the exact same price everywhere within Europe. Consequently, some goods differ in price, with cars being the most prominent example.


But as long as you can buy your car anywhere within the EU, you can also choose at what price you are buying. For example, I know quite a few people who have bought their cars in Belgium, the border to which is just a few minutes' drive away from my (German) hometome of Aachen, because the exact same car with the exact same option package was cheaper there. Which is perfectly fine, because you can buy that car in Belgium and bring it into Germany without much hassle.


Now, in that same sense, different pricing for iTunes tracks in different countries would also be perfectly OK, as long as iTunes customers could opt to buy the exact same track at the cheaper price in another countries' store. If that limitation — "you can only buy tracks from the iTunes Store in your country of residence" — were removed, the EU regulatory requirements would be met already. There is, however, no (legal) requirement to offer the product at a single price across the whole EU.

Thomas Fitzgerald
2007-04-04 03:59:47
It is amazing how the internet has totally botched up this story. The EU doesn't care one bit if Apple charges more in one country than another. What is it the heart of this issue, is restricting sales to individual countries, which is against EU law. As a by product of this, by forcing customers only to buy in the country of their residence and by charging more in one country they are preventing customers from seeking best price across the eu, which is also against EU law.


It shold be noted that certain "services" are currently exempt from this law, namely insurance and medical services, but these are currently under negociation.


It should also be noted that the European Comission is charged with enforcing the treaties upon which the EU is built, and this case falls under that remit, as it is existing laws that were broken.


It should also be noted that stores can refuse to ship to another region, but the can not refuse to sell. If the customer arraanges their own shipping they can not refuse to sell to them. As there is no shipping involved with the iTunes store this is not an issue


Once again, just to make this absolutely clear, the EU is NOT telling Apple they have to charge the same in every country, they are telling them they can't force customers not to be able to seek the best price by restricting sales from other EU memeber states.


People who are not familiar with the EU need to think of it like this. When it comes to trade, the EU operates much like the US. Individual member "states" can set their own taxes etc, but you can not discriminate against someone living in a different state by refusing to sell to them (at least I presume this is the case in the states)


I read a comment elsewhere that "the free market would work in an ideal world but the EU should just leave apople alone." Again, this is a lack of understanding of the EU. The EU has laws that supercede the laws of individual states, and free trade across borders is one of them. It is not an idea, or a theory, it is Law that has been signed by member states and is fundamental to the operation of the EU.

Richard
2007-04-04 04:07:37
A rather naive and uninformed view of the Euro. Would the author be an American by any chance?
jeremiah foster
2007-04-04 04:08:48
@ Thomas: Sounds all well and good until you realize that certain states, like Germany, which comprise the EU, disregard EU laws and regulation with impunity , such as not having a greater than 3% federal budget deficit. The EU commission may be instructed to uphold the law but that does not mean the members states actually do. This is in direct contrast to the United States where individual states may set sales taxes, (similar to VAT,) but where the federal government regulates interstate commerce. What the EU is is a "United States of Europe" (Churchill's term) without a mandate (witness the dismal failure of the attempt to have a constitution.)


My how this has become a discussion on the EU and not on Apple anymore. Interesting. We'll see what happens when American wakes and starts to post.

Mike
2007-04-04 04:21:08
The EU is nothing but a new Soviet Union. Gorbachev (remember him) refers to the EU as "The European Soviet".


The EU, like many other countries can't stand America's success. That includes their envy of Apple of course. Hence their hatred and continual legal wrangles against Apple.


These people, like many people in certain other countries hate America and want a free tap into the American economy because they feel it is their right to receive the benefits of America even though they did nothing to help create the things America provides to the world. That's Communism-Lite.


Jobs usually does the right thing in these cases: he tells those commie countries that if they can't play nice to go take a flying leap.


Which is the only correct way to deal with any communist or socialist country.


Do your research - free trade by the way was one of the Communists' original goals going all the way back to Lenin.

Thomas Fitzgerald
2007-04-04 04:28:36
The EU does have a mandate for the laws signed in the treaties that are ratified by individual countries. Businesses operating within the EU have to operate within EU law.


When countries break treaties it is a different matter. The case with Germany was different because it was felt that heavily fining one of Europes leading economic powers as the whole union was going through a down turn would have had diseasterous effects on the economey of the whole continent.


As for the constitution, that was rejected by peopele in individual countries voting in referrendum because the constitution cotained many aspects that people felt took away their identity. It was not a failure of Europe or the EU, except perhaps by individual governments to sell the idea to their citizens. If anything it was a victory for the process that gives the choice to ordinary citizens.


Yes, I have simplified the whole way this workes significantly, and the EU is not perfect, but nor is it the dismal failure people seem to be painting.


But all this is moot because the original point still stands, and that is that the issue with apple is less about pricing and more about cross border restrictions. If a company wants to operate within the EU it has to follow EU laws. It's as simple as that. As an European citizen I find it upsetting to hear other people telling us we can not enforce our own laws.

Peter Erwin
2007-04-04 04:42:23
Jeremiah said: So why does the EU commission bring Apple into this when the big four are the problem? The record companies insist on different prices in different countries, not Apple.


According to the BBC news web site (http://news.bbc.co.uk/2/hi/business/6520677.stm), the EU commission is also contacting at least some of the record companies: "Brussels has written to Apple and a number of unnamed record companies to notify them of their objections to the way music is sold, the first step in formal proceedings."


By the way -- kudos to you for being willing to acknowledge your errors! (And nice to hear that your problem is fixed.)


Oh, and thanks to Thomas Fitzgerald for explaining the "sales vs. shipping" issue; that does a nice job of explaining why, as Alberto pointed out, online stores like Amazon UK have variable policies about where they will and will not ship certain kinds of goods.

KenC
2007-04-04 07:44:20
If this was about price, then the underlying CDs sold should reflect this same pricing disparity, and thus absolve Apple of any abuse. However, if this is as Thomas points out about inability to purchase from one EU member state in another, then Apple needs to point this out to its music label partners and have their contracts rewritten to reflect this.
Robert
2007-04-04 08:29:42
Euro-plegics.


As in a paralyzed citizenry who expect their governments to make everything right, and don't bother to understand how businesses actually work.


Apple's iTunes Music Store, seller of a miniscule fraction of the music that people listen to, is getting an inordinate amount of flack from Euro-do-gooders. Inordinate, as in out of proportion, and undeserved.


iTunes is just a middleman. The major record companies (mostly European-owned, by the way) control the distribution of music, digital or otherwise, throughout Europe. On their own, digital distribution would still be in the relative dark ages, but Apple's iTunes has created a digital marketplace for music that consumers have responded positively to. Overwhelmingly.


So one by one, Apple reached licensing agreements to sell each label's music in country-specific music stores, abiding by the regional restrictions the labels demanded, and negotiating a consistent price WITHIN each market.


The fact that the labels would not allow cross region-free sales, nor a single price ACROSS all markets, is not Apple's doing.


If one actually reads the EU briefing, you can see the comission is being fairly realistic. Apple is 'charged' in the sense that it is, indeed, the point-of-sale contact, and the party in position to renegotiate distribution deals with the real culprits, the music labels. The EU is also charging the record labels for their part, and I hope, would look primarily for redress from them.


Is there an intelligent European out there who can provide other examples of products sold in various European countries that are differentiated by market? You can only buy the German version in Deutschland, the UK version in England, etc.? And then if that's a problem, who would do you try to sue: the retailer or the manufacturer?

DBL
2007-04-04 10:54:07
I'm impressed. Usually bloggers (especially so-called 'analysts') just mouth off and then give anyone trying to correct them the finger. Mouthing off and then thinking twice is a definite upgrade. Blog on....

2007-04-04 13:07:42
Robert - there are certainly German and UK specific CD releases, and definitely German and French DVDs and books that don't get a UK release - but generally speaking I can buy them directly from France or Germany - should I be willing to pay the postage and currency conversion. I buy most of my CDs from the US. Which is - as many people have said - the essence of the argument.

Personally speaking, if DRM-free downloads were the outcome of the last range of pressure, I welcome this one. I suspect Apple do too - it gives them the backing of a major trading block in negotiating contracts, which can't be a bad thing.


As for . .
>The EU is nothing but a new Soviet Union.
>The EU, like many other countries can't stand America's success. That includes their envy of >Apple of course. Hence their hatred and continual legal wrangles against Apple.


No. We just don't want companies setting themselves ABOVE consumer law. Much like American citizens dislike it when companies to the same within the US. The EU has also acted against EU airlines charging different prices to French and British passengers for the same flight bought from the same on-line sight. But I don't expect you to care about that, and it certainly doesn't make headline news in the US.


>These people, like many people in certain other countries hate America and want a free tap into >the American economy because they feel it is their right to receive the benefits of America even >though they did nothing to help create the things America provides to the world.


And that's hilarious. Statue Of Liberty and Tom Paine mean anything to you? Post-war US economic policy has it's origins in the free trade movement (which sought small government and low regulation) - or more specifically in replacing the UK as the world's dominant trading power, rather than the export of US goods and services. You've got a trade deficit - that means you import more than you export.


> That's Communism-Lite.
Actually, the EU as a whole mostly returns Social-Democrat governments, although it has been swinging to the right over the last few years. The hilarious thing is that many Americans regard this as automatically a bad thing. The US economy is undoubtedly more dynamic, there is - as they say - more than one way to skin a cat - i.e. economic growth is not the only measure of a country. If people want to vote for lower growth, higher taxes, but universal healthcare and education, they are free too. It's called democracy. Go and visit Norway. It's nice. The beers expensive but obviously the population are, overall, happy with that.


>Jobs usually does the right thing in these cases: he tells those commie countries that if they >can't play nice to go take a flying leap.
>Which is the only correct way to deal with any communist or socialist country.
>Do your research - free trade by the way was one of the Communists' original goals going all >the way back to Lenin.
Or if we step back a bit further . . Marx in The Communist Manifesto, "The bourgeoisie...has set up that single, unconscionable freedom -- Free Trade. In one word, for exploitation, veiled by religious and political illusions, it has substituted naked, shameless, direct, brutal exploitation."


Gee, that certainly sounds like a Communist goal. Or are you just setting up a straw man, so you can have a little rant, with scant understanding of history?

jeremiah foster
2007-04-04 13:30:49
Hmm, it appears I was right after all. Now the EU is saying Apple is not the target of investigations, but rather the record companies.
Robert
2007-04-04 14:48:25
@ Anonymous: I'm hoping that you and the other Euro-geeks here have figured out that Apple is just the store, one per country, that sells a specific digital type of specific songs that the manufacturer/music label has given it permission to sell IN THAT COUNTRY.


When you walk into your London retailer and find out you can't buy a German DVD or book from them, because the publisher isn't allowing UK distribution, do you whine at the clerk? At the store manager or store owner? I hope not. You should go elsewhere, do what you have to do to acquire what you want by some other means. And if finding other channels is difficult, inconvenient, or imperfect, because the publisher makes it so, is that any more the retailer's fault?


This is no different, fundamentally, than iTunes' situation in Europe.


Y'all don't like companies setting themselves above European consumer law? You must mean EMI, Sony BMG, and Universal, all European-owned companies, plus American-owned Warner.
It's the European record labels who demanded all those regional restrictions and negotiated the regional price differences.


Apple isn't your problem. Apple has every incentive to sell ALL of the music that the labels will let them to ANY consumer who wants to buy ANYWHERE in the world for ONE easy price. There is nothing Apple wants more than that, when it comes to digital music sales. Again, they aren't your problem.


verstehsh?

Whatever
2007-04-09 08:10:50
You are now entitled to a worse title than jackass, you are now the Dvorak of O'Reiily. How could you reach that level is beyond me, though.
Harry
2008-02-25 00:43:06
I have a problem and was wondering if you can solve my problem on your site. I am an American citizen, have a New York driving Licence (and can get an International Driving Licence) . I wish to buy a car in Holland, have an address there but am told I cannot buy or insure the car there since I am not a resident of Europe. I do not wish to lease or rent a car.
I have been told that Australians, New Zealanders and maybe some Americans do it and want your advice and help in solving my problem
Regards and Thanks
Harry Singh