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Apple (Nasdaq: AAPL) has reached a deal 
that will have it equalize prices on the European version of its iTunes Music Store and end a European Union probe into the legality of the original pricing policy.
As a result of the deal, iTunes users in the United Kingdom will see slightly lower prices for song downloads.
UK customers had been paying slightly more for music than their counterparts in other parts of Europe, prompting a UK consumer group to file a complaint with the European Commission, the regulatory arm of the EU. Currently, a song on the UK iTunes costs the equivalent of US$1.56 while those sold in the so-called euro zone cost $1.46.
Balancing Pricing
The EC is satisfied that its inquiry helped balance pricing. "The commission does not intend to take further action in this case," it noted.
"The commission is very much in favor of solutions which allow consumers to benefit from a truly single market for music downloads," said European Commissioner for Competition Neelie Kroes.
Apple CEO Steve Jobs called on music labels to work with Apple to level their own pricing and will give labels six months to renegotiate their UK deals.
"We hope every major record label will take a pan-European view of pricing," he commented. "Apple will reconsider its continuing relationship in the UK with any record label that does not lower its wholesale prices in the UK to the pan-European level within six months."
Regulators delivered a formal "Statement of Objections" to Apple and some music labels last April, more than two years after the UK consumer group Which? filed a complaint shortly after the European version of iTunes was launched.
Changing the View
The commission objected to Apple's use of different versions, or views, of iTunes for various European Economic Areas, with consumers limited to buying from the site established for their country and orders from customers without credit cards issued in that country rejected. The result was that UK consumers were paying approximately 10 percent more for downloads than their counterparts in other parts of the union.
Apple will equalize pricing within six months, with UK prices dropped to meet those in countries such as Austria, Belgium, Denmark, Germany, Finland, France, Greece, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Sweden, Spain and non-EU country Switzerland.
Complicating the pricing equation is that the UK still uses the Pound as its currency, while the rest of the European Union has adopted the euro.
The ruling is "great news for consumers," said Which? lawyer Chris Warner.
"We hope that other Internet companies -- including other online music companies -- will now follow Apple's lead and ensure their UK prices are aligned with those in continental Europe," he added. The group still wants Apple to break down the barriers between country-specific versions of iTunes, but the agreement does not include that change.
More Songs to Sing
The entire episode is another sign of strain in the relationship between Apple and the music labels, JupiterResearch analyst Mark Mulligan told MacNewsWorld.
"The labels blamed Apple and Apple [blamed] the labels, and now Apple is on record as saying the labels had forced them to pay more for music in the UK," he said.
Many in the music industry have been eager to see Apple's vise grip on digital music weakened to lessen its power to set pricing -- with many labels wanting music to be priced higher. "Apple's desire to distance themselves from blame in this case suggests they respect that the EU could have made life difficult for them," Mulligan added.
In fact, some commissioners have argued that Apple's iTunes-iPod link-up itself may represent an anti-competitive approach to the market, though no formal action has ever been taken on that front at the EU level and that issue may be waning in urgency as more iTunes music is being sold in DRM-free format that can be played on other company's music players.
Apple has the advantage of seeing the EU take a hard line against other technology companies, especially rival Microsoft (Nasdaq: MSFT), Yankee Group analyst Laura DiDio told MacNewsWorld.
"Jobs knows that taking a hard-line stance can lead to a very long and costly battle that doesn't help anyone," DiDio said. Apple also positioned itself well in the public's eyes by expressing a willingness to balance pricing -- putting the pressure back on the music companies to go along.
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