[Ecommerce] Apple's iTunes hits a sour note in Europe

[Malini Aisola]

*Following the Norwegian consumer ombudsman's ruling last week that
Apple iTune's lack of inter-operability with devices other than its own
iPod is illegal, Germany's federal consumer protection association, the
VZBV, and the Dutch consumer protection agency, along with Finland and
France, have joined a continent-wide move to get Apple to change its
coding restrictions.*

http://www.ft.com/cms/s/b6d322a2-af3d-11db-a446-0000779e2340.html

Apple's iTunes hits a sour note in Europe

By Bertrand Benoit, Tobias Buck, Delphine Strauss, Emiko Terazono and
Gerrit Wiesmann
January 29, 2007

Apple and its iTunes music download service are facing a growing
headache in Europe.

Following the Norwegian consumer ombudsman's ruling last week that Apple
iTune's lack of inter-operability with devices other than its own iPod
is illegal, Germany's federal consumer protection association, the VZBV,
and the Dutch consumer protection agency, along with Finland and France,
have joined a continent-wide move to get Apple to change its coding
restrictions.

"Consumers have a right to listen to music they have bought online on
all players," says the VZBV.

Germany's consumer protection minister, Horst Seehofer, plans to publish
a jointly authored "Charter for Consumers of Digital Media" in mid-February.

The charter will call on online vendors such as iTunes to ensure
thatdownloaded music can be played on all types of players, as well as
demanding that they address data-protection and liability issues.

The VZBV hopes that the government will use this national initiative to
create momentum for steps atEU level.

Germany holds the EU's rotating presidency until the end of June. "The
Charter will only be declarative in character, but we're hoping that the
German government will use it as a basis for a discussion with other
states at EU level about Europe-wide measures," the body says.

In France, Que Choisir, the consumer association, advocates an even more
radical approach to that of Norway, arguing that any use of digital
rights management was against consumers' interests.

The French group is inthe middle of a court case against Apple, after
scoring a legal victory this month against Sony France, which operates a
similar closedsystem tying music downloads to its own players.

Digital rights management and the lack of interoperability has been
blamed for slowing growth in legal digital downloads. Independent record
labels sell their music in unprotected MP3 format, while EMI has started
to experiment, recently releasing a Norah Jones single without DRM.

The British Phonographic Industry (BPI), which represents UK music
companies, last year called for grea-ter inter-operability, noting
Apple's dominant share in the digital music down--load market.

Apple has until October 1 to make its codes available to other
technology companies operating in Norwayor it will be taken to court,
fined and eventually closed down.

The question is whether the consumer protection groups in Europe will be
able to force Apple to change.

"Apple should be concerned, with each country in Europe seemingly
looking to follow the other," says Struan Robertson, senior associate at
law firm Pinsent Masons in Glasgow.

"Apple is aware of the concerns we've heard fromseveral agencies in
Europe, and we're looking forwardto resolving these issuesas quickly as
possible," the group said in a statement last week.

"Apple hopes that European governments will encourage a competitive
environment that allows innovation to thrive, protects intellectual
property and allows consumers to decide which products are successful."

So far, the European Commission has refused to join the crackdown on
Apple's iTunes, with one seniorofficial saying last year that Brussels
would need to study further market development.

Although iTunes continues to have a strong position in the online music
market, the Commission could well struggle at this stage toidentify a
clear market abuse on competition grounds.

Moreover, the market for online music - while growing fast - is still
much smaller than more traditional retail distribution channels, a
factor that is likely to curb Apple's overall impact on the music
industry for some time.

The Brussels-based antitrust regulator received a complaint about iTunes
from a UK consumer organisation several years ago, but its inquiry has
so far failed to yield any results.

In any case, the complaint was directed only at national price differences.


--

Malini Aisola

malini.aisola@cptech.org

www.cptech.org


Consumer Project on Technology

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Tel.:  +1.202.332.2670 Fax: +1.202.332.2673