EU ruling on Microsoft anti-trust sets precedent for Apple

Posted:
in General Discussion edited January 2014
The rejection of an appeal by Microsoft in a major European Union anti-trust case could provide ammunition for allegations that Apple's iTunes Store is engaging in unfair pricing.



Europe's Court of First Instance upheld a 2004 ruling against the Windows developer that found it responsible for abusing its monopoly of the software business, maintaining that the company owed the equivalent of $689.7 million in fines and had to ensure that its business practices followed European laws.



The original decision was the result of a six-year anti-trust investigation by the European Commission which found that Microsoft had illegally preserved its foothold on media playback software in Europe by bundling Windows Media Player with its operating system. RealNetworks and other firms participating in the investigation had argued that they were unable to gain meaningful marketshare, as few customers were aware of (or needed) an alternative program to play music and videos. RealNetworks decided against waiting for the appeal's decision and settled privately with Microsoft for approximately $761 million in 2005.



An additional complaint leveled against Microsoft in the case blamed the firm for hiding program source code that prevented Sun Microsystems and other rivals from building software that could interoperate with Windows servers.



Microsoft's general counsel Brad Smith said the company would agree to any final terms but was uncertain as to whether it would file an appeal with its last possible resort, the European Court of Justice. The ruling by the Court of First Instance was "serious and substantial" and deserved a cautious response, Smith said.



Though this leaves Microsoft's fate uncertain, the ruling could set an immediate precedent for future anti-trust cases. Until the latest ruling, the European Union had lacked few opportunities to test its anti-monopoly laws but has now gained a supporting case to wield against companies suspected of tactics similar to those reportedly practiced by Microsoft.



One of these is likely to be Apple. The California firm was accused along with record labels EMI, Sony-BMG, Universal, and Warner of crafting illegal deals for the iTunes Store that limited customers to buying from the online shop targeted at their country of origin. This kept prices artificially high for the same music in certain countries, the European Commission said when it began an investigation in April of this year.



Apple has so far denied that it had deliberately segmented the European market, contending that it had wanted a Europe-wide store from the beginning and had been pushed into negotiating separate deals by its record label partners. An EU spokesperson agreed that the focus should be on the four labels and that Apple was primarily involved only by association.
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Comments

  • Reply 1 of 30
    Quote:
    Originally Posted by AppleInsider View Post


    An EU spokesperson agreed that the focus should be on the four labels and that Apple was primarily involved only by association.



    EXACTLY!
  • Reply 2 of 30
    The EU may not go after Apple as a monopoly because of the fractioning of iTMS by country, but will they use this as precedent to accuse Apple of forcing its customers to only use iTMS to buy music for their iPods?
  • Reply 3 of 30
    Quote:

    RealNetworks and other firms participating in the investigation had argued that they were unable to gain meaningful marketshare, as few customers were aware of (or needed) an alternative program to play music and videos.



    First of all, why is it Microsoft's, or anyone else's for that matter, responsibility to make sure that its users are aware of a competitor's product.



    Second, has to do with the "(or needed)" statement. If few customers were aware that they needed an alternative program, then there must not have been much content out there that needed an alternative program so who give a rat's @$$.
  • Reply 4 of 30
    Quote:
    Originally Posted by floccus View Post


    The EU may not go after Apple as a monopoly because of the fractioning of iTMS by country, but will they use this as precedent to accuse Apple of forcing its customers to only use iTMS to buy music for their iPods?



    Err... what about CDs or any other music store that sells songs without DRM (except WMA)? I have an iPod and have yet to buy a single track from iTS, simply because the price is too high compared to physical CDs.



    Expect to see some action from the EU when the iPhone hits Europe though, with the exclusive contracts and so...
  • Reply 5 of 30
    Quote:
    Originally Posted by jbcaro View Post


    First of all, why is it Microsoft's, or anyone else's for that matter, responsibility to make sure that its users are aware of a competitor's product.



    Second, has to do with the "(or needed)" statement. If few customers were aware that they needed an alternative program, then there must not have been much content out there that needed an alternative program so who give a rat's @$$.



    Don't believe everything you read... not bundling competing software wasn't even close to being the worst thing that Microsoft did, and I don't agree that the news should be focusing on this.



    As an example, there are proofs of intimidation by Microsoft against computer sellers for them to only sell pre-installed Windows machines, and pressures for these sellers not to bundle competing software themselves.



    Other tricks include always following their own propriety crap file formats and then using their monopoly position to impose such file formats, that can't even be read on some computers (remember reading WMV files on the Mac?).



    Remember that Microsoft just recently slashed the prices for MS Office in China to fight against piracy? Why should I pay A LOT more for MS Office here in Europe than some guy in China? It's like rewarding piracy with cheaper prices, or just a proof to show that MS prices are ridiculously overblown, your pick.





    EU competition law states (Wikipedia):



    Article 82 is aimed at preventing undertakings who hold a dominant position in a market from abusing that position to the detriment of consumers. It provides that,

    "Any abuse by one or more undertakings of a dominant position within the common market or in a substantial part of it shall be prohibited as incompatible with the common market insofar as it may affect trade between Member States.



    This can mean,

    (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers; (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts."
  • Reply 6 of 30
    There isn't really a parallel to be drawn between the Microsoft and Apple cases. Microsoft was found guilty of abusing its dominant position in the market. Since Apple doesn't have a dominant position in music sales, there is no question of them being found guilty under the same provisions. The case against Apple is that it has breached EU law by preventing people within the EU from buying from different EU stores, and by charging different prices at those stores. The case originated with a complaint from the UK consumer body, Which?, because people in the UK are charged more than in other EU iTunes Stores, and do not have the option to buy from those stores. The record labels and Apple are therefore being accused of breaching the single market provisions of the EU Treaty, not of abuse of market position or anti-competitive behaviour.
  • Reply 7 of 30
    Quote:
    Originally Posted by KrisJonesUK View Post


    There isn't really a parallel to be drawn between the Microsoft and Apple cases. Microsoft was found guilty of abusing its dominant position in the market. Since Apple doesn't have a dominant position in music sales, there is no question of them being found guilty under the same provisions. The case against Apple is that it has breached EU law by preventing people within the EU from buying from different EU stores, and by charging different prices at those stores. The case originated with a complaint from the UK consumer body, Which?, because people in the UK are charged more than in other EU iTunes Stores, and do not have the option to buy from those stores. The record labels and Apple are therefore being accused of breaching the single market provisions of the EU Treaty, not of abuse of market position or anti-competitive behaviour.



    Yeah, even so, it's a touchy subject. I can't buy a price-reduced DVD recorder at Amazon.co.uk because they only ship within the UK, and I have to resort using something like Amazon.fr, ending up paying more for the same model. Of course it's not exactly the same thing, but just goes to show that price differences throughtout Europe are real and commonplace (with the UK paying more for almost everything...). If Apple can prove that the differences in price were solely due to the record labels then this should be no problem for Apple.
  • Reply 8 of 30
    So where do I sign up for my free handouts? If these courts had my parents growing up, they would have heard this line, "We can't have anything nice in this house because you always break it!"



    Oh well... let the money exchanges begin. This is why I teach instead of being a business owner.
  • Reply 9 of 30
    Echoing some of the comments above, this case is a non-issue for Apple. The EU is hobbling itself, by allowing a patchwork of laws to proliferate in its member states on music-related labeling, copyright, etc issues. Record companies add to this patchwork mess.



    CDs do not cost the same from one country to another even when denominated in euros. Why should iTunes downloads?
  • Reply 10 of 30
    jeffdmjeffdm Posts: 12,949member
    Quote:
    Originally Posted by floccus View Post


    The EU may not go after Apple as a monopoly because of the fractioning of iTMS by country, but will they use this as precedent to accuse Apple of forcing its customers to only use iTMS to buy music for their iPods?



    One problem is that the rights of any given might be fractioned by country too. It's probably not a major problem, but I think an EMI subsidiary in one country probably doesn't want to have to compete against other EMI subsidiaries.



    iTS isn't the only legal source of music for iPods. That said, with a lot of music going download-only, it can become a problem. I really don't know what the solution is, because I think it's a preposterous problem, because media generally wasn't tied to a particular brand of player.
  • Reply 11 of 30
    mcdavemcdave Posts: 1,629member
    Quote:
    Originally Posted by floccus View Post


    The EU may not go after Apple as a monopoly because of the fractioning of iTMS by country, but will they use this as precedent to accuse Apple of forcing its customers to only use iTMS to buy music for their iPods?



    This is the wrong way round. You can use music from other non-DRM'd sources on your iPod but not other devices with iTS purchases (except iTunes Plus). Although iTunes was released before iPods iTS was plugged in later so you could argue it's a companion product not an online retailer that's been closed for anti-competitive reasons. Apple have even covered their bases by saying they would open it up if the labels let them and one has.



    Quote:
    Originally Posted by AppleInsider View Post


    An EU spokesperson agreed that the focus should be on the four labels and that Apple was primarily involved only by association.



    Thank goodness but will this be upheld? Apple is the retailing party and has to have some responsibility in the outcome if not, all sorts of shady practice could be differed.



    Quote:
    Originally Posted by anantksundaram View Post


    Echoing some of the comments above, this case is a non-issue for Apple. The EU is hobbling itself, by allowing a patchwork of laws to proliferate in its member states on music-related labeling, copyright, etc issues. Record companies add to this patchwork mess.



    CDs do not cost the same from one country to another even when denominated in euros. Why should iTunes downloads?



    Those evil record companies again! The best thing Apple can do is play helpless, caught between a conflict of law and business interests.



    Maybe it could even offer it's 'help' to facilitate change in a market thats evolving far too rapidly. Of course this would be the ultimate weapon against stubborn media giants imagine being able to break the deadlock by order of the EU !



    McD
  • Reply 12 of 30
    melgrossmelgross Posts: 32,977member
    Quote:
    Originally Posted by floccus View Post


    The EU may not go after Apple as a monopoly because of the fractioning of iTMS by country, but will they use this as precedent to accuse Apple of forcing its customers to only use iTMS to buy music for their iPods?



    They've already stated that this case has nothing to do with that. Actually, there was a statement to the effect that hadn't been found guilty of doing that by several people. One in France, where Apple was found to be innocent of that, without the need to go to court, and the second in one Scandinavian country, though I forget which right now, where a consumer organization said everything was fine. I don't know if that was an independent organization, or a governmental group.
  • Reply 13 of 30
    melgrossmelgross Posts: 32,977member
    Quote:
    Originally Posted by jbcaro View Post


    First of all, why is it Microsoft's, or anyone else's for that matter, responsibility to make sure that its users are aware of a competitor's product.



    Second, has to do with the "(or needed)" statement. If few customers were aware that they needed an alternative program, then there must not have been much content out there that needed an alternative program so who give a rat's @$$.



    The wording wasn't entirely correct.



    The case was about MS making it too difficult for other companies to get the needed info, that MS was supposed to supply, to be able to get their software to function properly on MS's systems.



    That was the main thrust this time. Previously, MS had agreed to do just that. This is the result of the previous case against them which saw settled when MS agreed to stop bundling Media Player in every system, etc.



    They failed to live up to that agreement either.
  • Reply 14 of 30
    Quote:
    Originally Posted by anantksundaram View Post


    Echoing some of the comments above, this case is a non-issue for Apple. The EU is hobbling itself, by allowing a patchwork of laws to proliferate in its member states on music-related labeling, copyright, etc issues. Record companies add to this patchwork mess.



    CDs do not cost the same from one country to another even when denominated in euros. Why should iTunes downloads?



    You are missing the point, its not about the prices it is about the ability to buy.



    You can charge different prices in different countries if you want but there is a single European market and than means anyone i the UK can buy a car from a German car dealer if they want, anyone in Spain can buy a CD from a french hypermarket if they want.



    But Apple do not let someone in the UK buy a song from the french iTunes, this goes against everything that the single market stands for.
  • Reply 15 of 30
    mr. hmr. h Posts: 4,804member
    Quote:
    Originally Posted by jbcaro View Post


    First of all, why is it Microsoft's, or anyone else's for that matter, responsibility to make sure that its users are aware of a competitor's product.



    Second, has to do with the "(or needed)" statement. If few customers were aware that they needed an alternative program, then there must not have been much content out there that needed an alternative program so who give a rat's @$$.



    This case is all about abuse of monopoly power. Having a monopoly, in and of itself, is not an offense. However, if you use your monopoly in one market in order to gain a monopoly in another, that is anti-competive abuse of your monopoly power.



    Microsoft built its monopoly in the OS market. However, it did not have a monopoly in the media-player market, and then it started to bundle its media player into its operating system, making its media player the default and making it difficult for other media players to function fully.



    On the available content front: if you are publishing content, and suddenly not only do 95% of computers have Windows, but they also have Windows Media Player, which format are you going to choose to use? The available content has become pretty much only mp3 or wma because Microsoft illegally abused its monopoly power in OSes in order to gain a monopoly in media players.





    Moving on: this case in no way sets any kind of precedent for the Apple case. Apple are not being accused of abusing a monopoly position, mainly because they don't have one, whether you consider all music retailers or just online ones. They may be the number one online retailer across Europe, but they certainly are not in a monopoly position.
  • Reply 16 of 30
    Quote:
    Originally Posted by floccus View Post


    The EU may not go after Apple as a monopoly because of the fractioning of iTMS by country, but will they use this as precedent to accuse Apple of forcing its customers to only use iTMS to buy music for their iPods?



    I know a lot of people that have never bought music from iTMS for their iPods. Most of those people just rip their own CDs. iTunes doesn't force anything.
  • Reply 17 of 30
    Quote:
    Originally Posted by KrisJonesUK View Post


    The case originated with a complaint from the UK consumer body, Which?, because people in the UK are charged more than in other EU iTunes Stores, and do not have the option to buy from those stores. The record labels and Apple are therefore being accused of breaching the single market provisions of the EU Treaty, not of abuse of market position or anti-competitive behaviour.



    You should have adopted the Euro
  • Reply 18 of 30
    Quote:
    Originally Posted by camimac View Post


    Yeah, even so, it's a touchy subject. I can't buy a price-reduced DVD recorder at Amazon.co.uk because they only ship within the UK, and I have to resort using something like Amazon.fr, ending up paying more for the same model. Of course it's not exactly the same thing, but just goes to show that price differences throughtout Europe are real and commonplace (with the UK paying more for almost everything...).



    I think Amazon's case is different - it has to do with fraud and shipping more then anything. A while back we sold cell/mobile phones via the Internet. Not a good idea shipping outside your own country...chargebacks can be a b%tch, especially when they happen three months later.



    What I would agree with though is that prices very throughout the EU. BTW for cheapest electronic gear - try Germany. Usually a reliable eBay seller will sell to you as well. I get most of my gear from there and into Belgium as the prices here are dearer as well
  • Reply 19 of 30
    Quote:
    Originally Posted by camimac View Post


    Yeah, even so, it's a touchy subject. I can't buy a price-reduced DVD recorder at Amazon.co.uk because they only ship within the UK, and I have to resort using something like Amazon.fr, ending up paying more for the same model. Of course it's not exactly the same thing, but just goes to show that price differences throughtout Europe are real and commonplace (with the UK paying more for almost everything...). If Apple can prove that the differences in price were solely due to the record labels then this should be no problem for Apple.





    You're right that there are price differences for goods and services (one reason why many of us in the UK buy alcohol and tobacco from other European states). However, Apple are in a slightly different position in that they are selling the same digital product in the same way. There are no associated shipping costs. Regrettably the law is such that even if Apple adopted differential pricing at the behest of record companies, they are still culpable and could be fined.
  • Reply 20 of 30
    Quote:
    Originally Posted by freelander51 View Post


    You should have adopted the Euro



    Personally I'd be quite happy with the Euro. It gives me no pleasure carrying notes with pictures of the Monarch on them.
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