Tuesday, April 03, 2007

The EU is investigating Apple

A little while ago the French came pretty close to ruling the tying of iTunes and iPods anti-competitive but backed down. In Microsoft's case it was ruled, in the US and Europe, to be acting unfairly by merely packaging Media Player in with Windows. Users could still delete or replace Media Player and the replacement would function with Windows. By comparison, iTunes and an iPod only work with each other and no other hardware or software. The difference in treatment can only really be explained as a delayed reaction on the part of the authorities or Apple's hippyish, anti-establishment brand allowing it to sneak under the radar. Part of the reason the French are thought to have backed off is that Apple threatened to withdraw the service from France on the grounds tying is essential to their licensing system.

I'm not convinced the case against Microsoft was ever that strong. There are plenty of alternatives to Windows and if being given Media Player was really such a hassle I expect PC suppliers and customers would move pretty quickly. In reality Microsoft were just adding functionality and if competitors were good enough their software would be added by users or PC manufacturers in addition to the Microsoft software. In much the same way, while Apple's lead in hard-disk MP3 players may look formidable right now there is no reason to suspect that customer ill-will cannot kill this pretty quickly. There are alternatives which mean people could avoid buying iPods.

Now the FT reports that the European Commission is investigating Apple but not in an investigation of tying. The EU Commission is actually sticking to its brief for once and ensuring that the common market functions properly. Apple is being investigated for not allowing EU customers to shop from any EU store. This came up after Which magazine found that British customers were being charged significantly more than customers in other EU countries. Apple's defence, that this was insisted upon in licensing negotiations, just raises more questions as that means the problem is a broader one in the music industry.

The hypothetical of the commission taking antitrust action against Apple over the same issue as the French would have been very interesting. It would have offered quite a test of the power of pooled sovereingty.

2 comments:

Devil's Kitchen said...

"By comparison, iTunes and an iPod only work with each other and no other hardware or software."

Really? Well, when I say "really", I mean that you are talking rubbish. iTunes plays several formats (including MP3, AAC, AIFF, WAV), as does the iPod. This was the point that Jobs makes in his essay, Thought On Music. I would rebut the majority of your arguments about Apple, but I suggest that you read the above essay instead.

The case against Microsoft was because it was doing precisely the same thing: when you encoded stuff into Windows Media Player, it embedded MS's proprietory DRM into the files (at least iTunes lets you rip your own CDs without placing DRM on).

Re: the regionalised iTunes stores...
Apple's defence, that this was insisted upon in licensing negotiations, just raises more questions as that means the problem is a broader one in the music industry.
Quite. And yet it is Apple that is being investigated. Shouldn't the EU be investigating the music companies instead (after all, Vivendi -- a French company -- is one of the biggest of these)?

They could investigate the regionalisation of DVDs while they are about it, eh?

DK

Matthew Sinclair said...

DK,

iTunes does play different formats but it doesn't work with different music stores. That was the maker RealPlayer's complaint and is definite tying.

The EU is investigating music companies as well.

There is one DVD region for Europe so that doesn't create single-market regulation problems.