EU Drops Probe as Apple Equalizes iTunes Prices

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The European Commission ended its antitrust investigation into Apple after the company agreed to reduce the price of music downloads from its iTunes website in the U.K., the European Union's antitrust regulator said Wednesday.

Apple said that within six months it will lower the prices it charges for music on its U.K. iTunes Store to match its already standardized pricing across Europe in Austria, Belgium, Denmark, Germany, Finland, France, Greece, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Sweden, Switzerland and Spain

Until now iTunes has been more expensive in the UK, where the currency remains the British pound, than in the countries that have adopted the euro, as well as compared to Denmark and Sweden which tie their currencies closely to the euro, and also more expensive than in Switzerland, which isn't even in the European Union.

The European Commission welcomed Apple's plan to equalize prices for downloads of songs from the store in Europe.

"The Commission is very much in favor of solutions which allow consumers to benefit from a truly Single Market for music downloads," competition commissioner Neelie Kroes said in a statement.

For Apple, "This is an important step towards a pan-European marketplace for music," said Steve Jobs, the company's 's CEO. "We hope every major record label will take a pan-European view of pricing."

Apple blames the record labels for charging more to distribute their music in the U.K. than in other countries in Europe, and threatened to drop any record label from the iTunes portal if they didn't cut their U.K. prices.

"Apple will reconsider its continuing relationship in the U.K. with any record label that does not lower its wholesale prices in the U.K. to the pan-European level within six months," the company warned.

A download currently costs US$1.56 in the U.K. and US$1.46 in the stores Apple operates in the euro zone.

The Commission was satisfied that the price differential was not the result of collusion between Apple and the record companies. The probe "allowed the Commission to clarify that there is no agreement between Apple and the major record companies regarding how the iTunes store is organized in Europe. Rather, the structure of the iTunes store is chosen by Apple to take into account the country-specific aspects of copyright laws," the Commission said.

It added that it is aware that some record companies, publishers and collecting societies still apply licensing practices which can make it difficult for iTunes to operate stores in a uniform manner in all European countries.

No antitrust action would be taken against the record companies, said Jonathan Todd, the Commission's competition spokesman. "Our understanding is that the record companies that don't apply pan-European pricing [for their music] do so respecting copyright policy, and that is not an antitrust violation," he said.

Todd also dismissed speculation that the Commission might open a separate antitrust investigation of Apple's iTunes policy of favoring Apple's own music hardware, the iPod.

"We are in favor of interoperability but Apple isn't dominant in the market so there is no violation," Todd said.

The pricing differential for music downloads on iTunes in the U.K. was brought to the attention of the Commission in a complaint by the U.K. consumer organization Which?

Todd said the matter was resolved after direct talks between Kroes and Jobs.

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