EC and market interference

January 10, 2008 Comments Off on EC and market interference

Apple has announced that it will cut the price it charges for music downloads in the UK from its iTunes music store within the next six months.

European Union regulators began investigating iTunes last year after the consumer group Which? complained about its pricing policies.
Which? originally lodged its complaint with the EU in 2004.

Source: BBC
So this is how it works: EU Commission tells American company not to take into account the local economic situation! I’m not an economist by far. But I do know a little about income and disposable income (living together with an HR director has it’s advantages).
Neelie-KroesUK ITMS charges 79p for a song, and European ITMS charges .99€ (equivalent to 75p today). Now if you go to the UK you will soon notice that most things cost at least 5% more than here in Belgium where I live. But people have higher incomes in the UK! I’ve seen adverts on London busses asking people to join up for 500£ a week. This is equivalent to 2500€ gross income in Belgium (reduced to 1200€ in a month). More than 80% of people in Belgium have an income that is lower than that!
So the main reason that songs are more expensive in the UK is that behind the whole ITMS there is a bunch of people working from record companies (who resell to ITMS) and Apple. And these people will be paid higher incomes which explains immediately why songs are a mere 5% more expensive. There’s a valid reason for the higher prices… there are humans involved. Humans who need to paid according to their economic situation… which means higher incomes in the UK in order to be able to pay food and the rent (which is more than 5% higher than most European countries).
Apple has found a solution though:

“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,” the company said in a statement.

Hot potato? Throw it! And they are quite right…
It’s a pity to see that what was once called the European Economic Union, erected to create one single market in Europe, does not respect economic laws, but tries to circumvent and “steer” the economy by interfering in economic processes. And how will Apple proceed now? Now that the Pound Sterling is fluctuating a lot against the Euro, will Apple have to change the prices on every ITMS on a daily/weekly/montly basis?


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