Better iTunes Killer: Antitrust or Amazon?

by on January 25, 2008 · 6 comments

I’ve been busy with other projects, like the panel discussion on privacy I did with fellow TLFer Jim Harper, but I’d like to jump in on what is now an old story. Variety, among many others, reported on June 9th that the EU resolved its qualms with Apple after Jobs and company agreed to standardize pricing policies across Europe.

Apple has been charging consumers in the UK 10% more than the rest of Europe, but Variety failed to mention why this policy was in place. The EU determined that neither Apple nor the recording companies that distribute through iTunes were varying prices in order to take advantage of consumers. Instead, as The Business Times aptly reported, the price differences were attributable to, “copyright laws specific to individual countries.”

So, Apple was pricing differently in different markets because of genuine differences in those markets, not because Steve Jobs secretly hates limeys.

What I found most disturbing about the reporting on this case was this statement from European competition commissioner Neelie Kroes:

The commission is very much in favor of solutions that allow consumers to benefit from a truly single market for music downloads.

A single market? Why not many markets? A single place to buy songs sounds a lot like a monopoly to me.

Thankfully, the market is much smarter than those charged with regulating it. now offers DRM-free songs from all of the Big Four labels and according to this Arsticle, Yahoo! Music plans to do the same. So, while EU regulators were busy “probing” Apple for its abusive iTunes in an effort to create a “truly single market,” market forces were at work to undo the DRM system that prevented iTunes songs from being played on non-iPods.

The temporary market dominance enjoyed by iTunes created a huge incentive for other players like Amazon and Yahoo! to enter the market with their own stores and bring choice to consumers. The record companies were also beholden to a monopsony buyer who they believed didn’t give them a fair deal. With no help from Ms. Kroes, consumer demand and supplier unease undid this very unstable arrangement and found a better way to deliver MP3s.

Better luck next time regulators.

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