SONY BMG Successful in EU Investigation of Apple's iTunes Platform

January 9, 2008

On January 9 2008, the European Commission announced the closure of a three-year antitrust investigation into Apple’s online music download agreements with the four major record companies (EMI, SONY BMG, Universal and Warner Music). Closure of the investigation was facilitated by Apple’s public announcement that it will within the next six months lower the prices it charges for music on its UK iTunes® Store to match the already standardized pricing on iTunes across Europe. The Commission found that the agreements between Apple and the majors did not violate EU competition rules, and no concessions were made by the record companies. Cleary Gottlieb represented SONY BMG, which is a 50-50 joint venture between Sony Corporation of America and Bertelsmann.

In 2004, the UK consumer organization “Which?” complained with UK and EU competition authorities that Apple’s iTunes online music service charged more for music downloads in the UK than in the rest of Europe, and that UK consumers were prevented from downloading music through lower-priced iTunes online storefronts directed at Continental European countries. In March 2007, the EU Commission brought charges against Apple and each of the four major record companies, alleging that the online music download agreements between Apple and the majors contained restrictions on “cross-border” sales within Europe.

The case clarified an important issue of principle, i.e., that it is legitimate for record companies (and other content providers) to limit a license for online content to the territory of individual EU countries and to provide for staggered release of such content across Europe. Restrictions on UK consumer’ ability to download music through iTunes online storefronts directed at other countries did not reflect an agreement between Apple and the record companies, but reflected each record company’s freedom to determine when and what music content to license for online sale to UK consumers (as well as Apple’s unilateral decision not to allow “cross-border” access to iTunes online storefronts). In announcing the closure of its investigation, the Commission explained, ”the fact that the same content is not available in all EU countries is not the result of restricted business practices between Apple and the record companies, but of the restricting copyright legislation”.