Regulation Begets Regulation

The New York Times reports that European regulators are becoming increasingly concerned about the development of the music-download market:

Government consumer protection agencies in Norway and Sweden want Apple to remove restrictions that prevent customers from playing music they bought through iTunes on devices made by other companies.

And in Britain, one of the largest digital music markets, the British recording industry’s trade association, known as B.P.I., told a Parliamentary committee on Tuesday that iTunes music should be made compatible with other portable music devices. It was the first time the group had taken a public stance on the issue.

Early last year, European Union competition regulators opened an investigation into Apple’s pricing practices at the behest of Britain’s Office of Fair Trading. Users of the British iTunes Web site are charged 99 pence, or $1.82, for most iTunes tracks, while French users are charged 99 euro cents, or $1.25.

“European regulators are clearly concerned that consumers need to get a fair deal when they buy music online,” said Struan Robertson, a British-based technology lawyer at Pinsent Masons. “Since we share very similar competition laws across the E.U., a domino effect could cause changes across the Continent.”

I suspect that these regulators will come up with bad policy proposals; government regulators almost always do. Certainly, mandating that Apple change its format, or share proprietary details of its format with other companies, would be bad policy, opening the door to the politicization of the digital music industry.

But I can’t say I’m shocked at their concern. The DMCA (and in Europe, the EUCD) have had the unintended consequence of giving Apple a monopoly on iTunes-compatible MP3 players. And so it’s not crazy for them to be looking into ways to remedy the problem.

But the right way to deal with the problem is to repeal the law that caused the problem in the first place, not to add another layer of regulations on top. Because those regulations, too, will have unintended consequences. If you repeal the DMCA and the EUCD, makers of competing MP3 players will reverse-engineer FairPlay and add the capability to play iTunes songs. No further government oversight will be required. But if you pass additional regulations, we’ll have to come back in another decade to figure out how to deal with the unintended consequences of those regulations.

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