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Brussels, 3rd April 2007
Competition: European Commission confirms sending a Statement of Objections against alleged territorial restrictions in on-line music sales to major record companies and Apple
The European Commission can confirm that it has sent a Statement of Objections to major record companies and Apple in relation to agreements between each record company and Apple that restrict music sales: consumers 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 Commission alleges in the Statement of Objections that these agreements violate the EC Treaty's rules prohibiting restrictive business practices (Article 81).
Apple operates a series of iTunes on-line stores in the European Economic Area (EEA) which sell music downloads. The Statement of Objections alleges that distribution agreements between Apple and major record companies contain territorial sales restrictions which violate Article 81 of the EC Treaty. iTunes verifies consumers' country of residence through their credit card details. For example, in order to buy a music download from the iTunes' Belgian on-line store a consumer must use a credit card issued by a bank with an address in Belgium.
The Statement of Objections does not allege that Apple is in a dominant market position and is not about Apple's use of its proprietary Digital Rights Management (DRM) to control usage rights for downloads from the iTunes on-line store.
Statements of Objections are a formal step in European antitrust investigations. After receiving such statements, companies have two months to defend themselves in writing. They can also ask the Commission to hear their case at an oral hearing which usually takes place about one month after the written reply has been received. Only after having heard the company's defence can the Commission take a final decision, which may be accompanied by fines of up to ten per cent of a company’s worldwide annual turnover.