The European Commision has launched an investigation into the territorial licensing models that prevent iTunes music costing the same in every European state.
The Commission has written to Apple and the major record labels accusing them of enforcing these restrictions, meaning music fans in one European country are unable to buy music from a website outside the country, but still in Europe.
This is a system which clearly runs counter to the notion of the single European market, as it restricts consumers to buying music from their country of reidence – even if the state next door sells music for cheaper.
Apple has said it wanted to offer a single European service, but faced obastacles from labels and artist royalty agencies. The music industry has historically developed a territorial licensing model.
"We were advised by the music labels and publishers that there were certain legal limits to the rights they could grant us," Apple told the BBC.
The Commission alleges in its letter that these agreements violate the EC Treaty's rules prohibiting restrictive business practices (Article 81).
It alleges that distribution agreements between Apple and major record companies contain territorial sales restrictions which violate Article 81 of the EC Treaty.
"iTunes verifies consumers' country of residence through their credit card details. For example, in order to buy a music download from the iTunes' Belgian on-line store a consumer must use a credit card issued by a bank with an address in Belgium," the Commission explains.
The letter does not allege that Apple is in a dominant market position and is not about Apple's use of its proprietary Digital Rights Management (DRM) to control usage rights for downloads from the iTunes Store.
Statements of Objections are a formal step in European antitrust investigations. After receiving them, companies have two months to defend themselves in writing. They can also ask for an oral hearing which usually takes place about one month after the written reply has been received. Only after having heard the company's defence can the Commission take a final decision, which may be accompanied by fines of up to ten per cent of a company’s worldwide annual turnover.