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Music Media Businesses The Almighty Buck Apple Your Rights Online

iTunes(UK) Targeted By The Office of Fair Trading 145

Posted by timothy from the they-say-that-ones-cow-is-a-man dept.
dreadz1 writes "It seems that Apple is under fire for overpricing it's iTunes music for UK customers. This story from the BBC says that here in the UK we are charged 20% more for music on iTunes than the French and the Germans. Should Apple lower its initial price so that the cost+VAT is equivalent to prices in the EuroZone or should we grow up and get used to the fact that things are priced differently in different places?"
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iTunes(UK) Targeted By The Office of Fair Trading More

iTunes(UK) Targeted By The Office of Fair Trading

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  • Everything is more expensive in England. (Score:5, Insightful)

    by Anonymous Coward on Wednesday September 15, 2004 @09:15AM (#10255415)
    If the music companies in the UK charge more, then Apple will charge more.

    Simple economics.
    • "Everything is more expensive in England"

      Rubbish. Besides, this doesn't make it right. Or are you one of these folks who back Apple no matter what they do?

      It doesn't matter anyway, if they keep selling digital downloads for the same price as a real album, i'll carry on downloading. I was looking for a book today on Amazon ('Bringing Down The House'). It was cheaper as a real bona-fide book than as a download. Go figure.
      • If you switched to the euro you wouldn't have this problem. Seems obvious enough to me and the rest of europe...
        • And how would this help overcharging? I seem to recall many countries had price rises after switching to the euro.

          They would have an argument if they were overcharging on real CDs. However, a digital download costs the same to send to Germany or the UK, so why the discrepancy? It's profiteering isn't it?
          • You're already being overcharged... Somehow I doubt a switch to the euro would make Apple raise prices in Britain. Sure a digital download costs the same, but are there different legal systems to deal with. I noticed that cds in te UK are much more expensive than anywhere else. Somehow I doubt shipping to the UK doubles the price...
            • Yes we are being overcharged, hence why this is being investigated. Moving to the Euro now wouldn't stop this happening.

              I assume the 99 cents/pence thing is probably marketing led, i.e. what they can get away without going over to a gnarly looking 3 digit number. If they can't justify the difference between us and the rest of Europe then they deserve to be penalised. I thought they weren't allowed to restrict trade within Europe due to EU law, hence why can't I buy from the German site?

              • Re:just switch to the bloody euro (Score:1, Informative)

                by Anonymous Coward
                I thought they weren't allowed to restrict trade within Europe due to EU law, hence why can't I buy from the German site?

                probably because there isn't one music body that encompasses all of the EU; distribution rights are still country based.

          • Re:just switch to the bloody euro (Score:5, Funny)

            by silicon not in the v ( 669585 ) on Wednesday September 15, 2004 @11:45AM (#10256755) Journal
            They would have an argument if they were overcharging on real CDs. However, a digital download costs the same to send to Germany or the UK, so why the discrepancy? It's profiteering isn't it?
            The UK is on an island. Of course it's going to cost more for them to import the files across the ocean/channel to the local Apple servers. Remember, as the RIAA has told us, a download is the same as a physical CD.

          • Re:just switch to the bloody euro (Score:5, Insightful)

            by CaptMonkeyDLuffy ( 623905 ) on Wednesday September 15, 2004 @02:49PM (#10258719)
            Actually, there are two very possible reasons why a digital download would cost different amounts to send to Germany or the UK.

            First off, any form of taxation on the product could very well be different between the German and UK markets.

            Second, distribution rights are frequently not 'universal.' It's normal for the rights to distribute some form of IP to be limited in scope to specific regions. It would at least be theoretically possible for Apple to be charged different amounts for the rights in the UK as opposed to Germany...

            That said, the article itself doesn't directly address either of those possibilities, however the general impression the article gives(as well as the phrasing of Apple's reply) implies that it is probably a case of Apple pricing relative to the competition by choice. Still, the main point is the costs of sending a digital download to different countries is not always the same since there are significant factors in the price above and beyond the simple case of 'how much does the server/bandwidth cost.'
        • Yes - we should give up our independence and freedom in order to secure (slightly) cheaper music. Brilliant. What's you cure for a stubbed toe? Cutting one's foot off?

          Ignoring your inane suggestion for a second I don't see anything wrong with Apple's behaviour. They're not a monopoly and they can charge as much as they like for their product. If people find it too expensive they shouldn't buy it. If sales stayed low Apple would soon cut their prices.

          • Yes - we should give up our independence and freedom in order to secure (slightly) cheaper music. Brilliant.

            Well, it worked for the US.
          • Yes - we should give up our independence and freedom in order to secure (slightly) cheaper music.

            Could you please tell me WTF your independence and especially your freedom has to do with your goddamned currency?! Can you tell any noticeable differences occured in any of the euro zone countries since 1.1.2002 (or since 1.1.1999, for that matter), except that the notes and coins look different and their nominal value differ from the former domestic currencies? No? Well, that's because there isn't any!

            Th
      • One reason for that is that there is VAT on ebooks but not on paper books.
    • Simple economics it is, as long as a company has a right to charge more. In some cases they don't.

      It could be argued that preventing people from other parts of the EU to buy things from say iTunes music store in Germany for no other reason than to charge more in another part of the EU, is in breach of the EU legislation on free trade. Companies within the EU does not have the right to stop people from buying their products in another part of the EU.

      To compare differences on pricing between the US and
      • That's rather the point: they do *not* have the right to charge more. And in addition they are preventing people in one part of the EU buying from another: as a UK resident Apple will stop me buying from the continental iTunes store. That's explicitly against the law in Europe and hence the complaint.

  • They should lower thier prices (Score:3, Insightful)

    by tod_miller ( 792541 ) on Wednesday September 15, 2004 @09:21AM (#10255471) Journal
    After all, we have the best music, why should we pay more for all this foreign rubbish? :-)

    The internet is a difficult place for pricing, I cannot see any justification for this price increase, so it should go. If however thier costs were equally higher for serving to the britpub.crowd then I would say leave it.

    Seems to me they just scale thier price to economies.

    Rotten blighters. What-ho-chaps.

    • Modded interesting? (Score:2, Insightful)

      by Anonymous Coward
      Bandwith is not the only thing you pay, you know. When you set up a music download store, you license the music from the labels. That is the biggest chunk of money you pay (in the US, it's 65cents a song vs 34cents for other expenses and profit). If the British labels license songs at higher price than the rest of Europe, Apple can hardly be blamed for the price difference. What company thinks it's a good idea selling products at a loss indefinitely? To cover expenses, you have to increase the price.

      Blame

  • Corporate anti-globalization (Score:4, Interesting)

    by hey! ( 33014 ) on Wednesday September 15, 2004 @09:29AM (#10255526) Homepage Journal
    The way globalization works is this: you compete with some overseas guy for a job, so in the long term, you probably still have a job, but it's at lower wages.

    However, this doesn't really matter in the long term because producers are competing with each other internationally too, driving price down. In fact <waving hands>since capital is freed to seek the most efficient distribution of resources, productivity goes up on one hand, and competition drives prices for goods down even more than wages. This means that while on paper you make less money, your real buying power is increased and everybody wins.</waving hands>

    But --- corporations don't want to compete on price internationally, whether it is on prescription drugs, or entertainment like music and moves. Differential pricing allows them to make greater profits. But the whole system of assumptions that resulted in everybody winning falls down if corporations are not forced to compete on price internationally along with labor.
    • even assuming the validity of your "long-term" endpoint (it's a reasonable theory, but we won't really know until (if?) we get there), the transitional time is a huge problem. corporations aren't resisting the move just because they don't like the endpoint, they're resisting because whoever starts moving in that direction first - that is, whoever has to start competing on price globally first - looses: their revenue will go down substantially. it's the same reason individuals resist globalization of jobs: i
      • Easy - companies want a right to hire anywhere, take advantage of other countries' weak labor laws and not pay high import duties. In this case, I have a full right to buy my stuff everywhere, take advantage of other countries' weak IP laws and not pay high income taxes. And if I were to hire some illegal immigrants to get services for 3rd world prices just like my employees do, who is to say no to freedom of labor?

        Kick out croonies of big business and rich people from your government and you will either

  • EC (Score:4, Insightful)

    by Havaska ( 813684 ) on Wednesday September 15, 2004 @09:33AM (#10255553)
    The prices should be same or pretty clsoe throughtout Europe because of the common market. It makes sense that they should be pretty even. You have to wonder, if the UK had the Euro, would they charge only 0.99 or would they have upped it to 1.29 ?
    • As i recall, the sticker price of something in the UK is the total of the price of the item and VAT. Now if they lowered it so that the end user pays they same amount as somewhere else, that would mean that Apple would fit the bill for the VAT, in which case iTunes would probably just be pulled out of the UK. On the other hand, they could show the same cost across the EU and just tack on what ever local taxes when you pay it, in which case people would still be whining. Of course, they always will.

      It break
      • You do know they have VAT in the union as well? And if something is sold with VAT in one part you do not have to pay VAT in the other? So, as I am sure Apple have done, they register to pay VAT in one country and they're covered for all: they do not have to pay VAT individually to each country (hence the reason iTunes works everywhere else in Europe; just because they have a common currency doesn't mean they have a unified tax system).

  • Growing up (Score:2, Interesting)

    by jeorgen ( 84395 )
    or should we grow up and get used to the fact that things are priced differently in different places?

    Eh, that is not growing up. It's the companies that need to realize that people will buy where it is cheapest and will feel cheated if the price is higher where they happen to live.

    • Re:Growing up (Score:3, Insightful)

      by meringuoid ( 568297 )
      I'm happy for, say, a fish to cost more a hundred miles inland than it does in a fishing port. It costs money to refrigerate and transport that fish inland.

      I'm unhappy when a DVD costs significantly more in the UK than in the USA. It costs very, very little to ship an inert, imperishable, small and light object across the Atlantic.

      I'm utterly livid when a music download costs more in the UK than, well, anywhere. It costs nothing to transfer.

      Geographical pricing differences on virtual products like the

  • blame the UK government (Score:4, Insightful)

    by javax ( 598925 ) on Wednesday September 15, 2004 @09:40AM (#10255611)
    for not replacing the pound by the Euro.
    I assume that the prices in Germany and France are the same, because they have the same currency.

    btw Apple hardware is much cheaper in the US than in Europe - how about complaining on this?
    • btw Apple hardware is much cheaper in the US than in Europe - how about complaining on this?

      And the solution I hear from Europeans is to, get ready, increase the taxes in the US! Tsis is the exact argument they make about gas prices being cheaper here, and I would bet a week of your pay that they would make the same argument again. But then I guess those 'free' government services have to be paid somehow ...

    • Except it's nowhere *near* as easy as the simple "replace GBP with EUR" solution you imply; there are massive economic & political issues - basically the government passing/losing power to Europe - as well as the straight social one: people don't want to change their currency, as it'll mean they have to rethink/relearn the price of *everything* - would you be willing to do it? Read this for more info:

      http://www.psr.keele.ac.uk/docs/efaq.htm [keele.ac.uk]

      Not that I'm saying switching to the Euro would be a bad th
      • So you're saying that Brits are much more easily confused than everyone else in Europe, who don't appear to have any major problems understanding their new currency?

        I'm sure in 1971 there were people arguing that making 100 pence=1 pound would just be too confusing. I mean, if you knew something cost a shilling and 3 farthings, you'd just be lost trying to figure out if getting the same thing for 6p was a good deal or not after the changeover.

      • People pissed and moaned about the decimalised Pound(s) in 1971 too, claiming they'd have no idea how to count their money anymore in the much simpler system. They got over it pretty quickly, but as stated in the above Euro-transition document, some took it as an opportunity to raise prices. The UK should continue to be wary about adopting the Euro for a number of reasons, the FAQ is a good view of the issues.

  • Adopt the euro, pay the same price... (Score:4, Interesting)

    by isaac ( 2852 ) on Wednesday September 15, 2004 @09:45AM (#10255656)
    Earth to Britain: If you're tired of being gouged by your local vendors (as compared to the continent), adopt the euro.

    People in the UK have always been gouged on everything. What sells for $1 in the US usually sells for £1 in the UK (and now 1 in most of Europe). Great for foreign companies selling into the UK market. Not so great for UK companies that have to pay inflationary wages to local employees just to survive.

    I don't know why the UK puts up with this state of affairs. I wouldn't be surprised to learn those who gain under the present arrangement might manipulate of nationalist sentiment against the euro through media outlets they control.

    -Isaac

    • Re:Adopt the euro, pay the same price... (Score:5, Interesting)

      by killbill! ( 154539 ) on Wednesday September 15, 2004 @10:11AM (#10255867) Homepage
      Amen to that.

      Go to any large supermarket in Calais, France (closest city to England, ferry and Channel tunnel terminal) on any given Saturday, and you'll see about 2 cars out of 3 are from England.

      If you go shopping every 2nd week, you'll easily make those 100 pounds back.

      The iTMS isn't especially expensive when compared to other goods in England. It's just that about everything is outrageously expensive there.

      • Re:Adopt the euro, pay the same price... (Score:5, Informative)

        by Richard_at_work ( 517087 ) on Wednesday September 15, 2004 @10:35AM (#10256065)
        They arent just there for the lower price the euro brings, most people I know visit France because they put less tax on cigarettes and alcohol than the UK does, and quite a few trucking firms I know about register and tax their vehicles in France or Belgium, because UK taxes are horrendous. Basically the UK government is bleeding the taxpayer dry. (greater than 70% of the price of petrol goes to the government, this is the reason we pay 80p a litre - or $6 a gallon - supposidly to make us use our nongreen cars less. And guess what? Convert your car to run on vegetable oil, which is a hell of a lot environmentally friendly, and you still have to pay that tax.)
        • The taxes on fuel in Germany are equally ridiculous: We almost pay Euro 1.20 for one liter (with an exchange rate of 1.46 your price per liter is about Euro 1.17).
          At least our politicians are creative about names for the taxes on fuel: its not just sales tax but "Environmental Tax"..
        • I wish we Americans had such a fuel tax.

          The number of our international problems that have derived from the fact that we drive SUVs and demand massive amounts of cheap oil is just stupid.
          • How much extra to you send the goverment each year?
          • I wish we Americans had such a fuel tax.

            The number of our international problems that have derived from the fact that we drive SUVs and demand massive amounts of cheap oil is just stupid.

            I don't drive an SUV (I drive a sport wagon because I have musical instruments that are large), but I still have to fill my gas tank up about once a week for about $30.

            High fuel taxes work great in places like Europe where everything's close to everything else and there's mass transit between just about any two points y
            • Things are completely different here, however, and attempting to adopt Europe's solution to attack arbitrary American problems is short-sighted idiocy. Higher (3x) fuel taxes will only put an even larger burden on the rural/suburban poor than already exists.

              Great, so get a fuel efficient car. If you buy a 6,000 lbs SUV, that's basically free anyway if you can use all the deductions, the least you can do is take it up the ass on gas prices.
            • your argument is, well, stupid. most of the us (where "most" is scaled by population) is much closer together than europe. europe tends to have large cities with huge swaths of nearly-empty space in between. you don't really get anything in europe like the stretch from boston to DC, as an extreme example.

              also, there's the important fact that you choose where you live and work, for the most part. paying more for fuel changes the economic justification of some of those choices. deal with the change. the burd
            • Higher (3x) fuel taxes will only put an even larger burden on the rural/suburban poor than already exists.

              What a bullshit. I live in Finland, which is much more rural as a whole than the vast majority of the US, and there is no problem whatsoever to reach any town with >5000 or so relatively easily using the combination of trains and buses.

              Just plan and build a good public traffic network, and you won't really need a car except for some rare cases when you actually need to go to countryside. Yes, peop
              • Have you done any serious traveling through the United States? Do you realize how big the country is? Getting public transportation out to everyone would be horrendously expensive. It's nowhere near economically viable . The scale of the problem is massive.
                • That's one of those things I've noticed many Europeans are ignorant of about the US. Finland is 130,559 square miles in area. The US is 3.5 million square miles. Even taking away Alaska and Hawaii, that still leaves the mainland US with more than 2.8 million square miles of land.

          • What you mean "we", white man? I don't drive an SUV.
        • er, what? i live in london; i've bought vegetable oil. was i paying a hidden fuel tax and just not realizing it? or am i supposed to let the girl at the till know i'm using it for fuel, so she can charge me more? what are you talking about? how do i still have to pay a tax on petrol if i'm not buying petrol?
          • If you use Vegetable oil for motoring purposes, IE converted diesel engine to run on it (kits are about £300 with little loss of power to the engine), you are supposed to declare to the Inland Revenue the amount of oil used for this purpose and they will come back to you with a tax amount. The tax isnt as bad as petrol, but it more than doubles the price of a vegetable oil litre.
            • okay, first off, that is totally bizarre. it's kind of like Use Tax in the states. we all pay our Use Tax, right? most readers are probably saying something to the effect of "huh? never heard of it." and that's nearly exactly the point. second, the fact that it's not the same tax as petrol doesn't do much for the grandparent's point.

              it makes me glad i don't have a car here (not to mention that just seems like a stupid idea, living in the city itself). do i need to pay extra for water if i put it in my batt
              • Actually, asking around here (I work for a vehicle management company) the tax is exactly the same as petrol tax, sorry for my mistake earlier. The reason they dont have the tax placed on the goods at point of sale is that these converted engines work jsut as well off of filtered vegetable oil as acquired from the back door of a takeaway shop (filtered to remove the floating food matter etc) and vegetable oil off the shell has a greater use as cooking oil. Therefor the best method is to rely on end users
    • I wouldn't be surprised to learn those who gain under the present arrangement might manipulate of nationalist sentiment against the euro through media outlets they control.

      Someone mod that +5 Insightful. It's primarily Rupert Murdoch we have to thank; his news empire is implacably anti-Europe, mainly because the rest of the EU doesn't let him do exactly as he pleases.

      As a result, there is much propaganda about, aimed at making sure we keep our currency, which is an ancient and proud symbol of British so

  • The buyer's location has ceased to matter (Score:4, Insightful)

    by dschuetz ( 10924 ) <.gro.tensad. .ta. .divad.> on Wednesday September 15, 2004 @09:47AM (#10255674)
    At some point, industries are just going to have to get used to the fact that people want to buy from *everywhere*, not just the store in their own town/state/country. If someone in the UK wants to buy from the US store, they should be allowed to, at the US prices. Just like anyone in the US who wants to buy from Amazon-UK can. The downside is you only get whatever international support, if any, the distant store feels like offering.

    Of course, content-owners don't like this, 'cause they like having their own little state-sanctioned monopoly on their own content and for some reason can't stomach the fact that someone in another country might want to sell the same stuff.

    The way I figure it, if the original rights holders have been compensated, then any and all cross-border traffic in IP goods should be permitted. Why should I care if $$ go to Warner Brothers in the UK or in the US, as long as it goes to WB?

    Solve that problem, and pricing disparities between different countries' stores will eventually disappear (or the stores will, 'cause they're not being competitive).
    • I have a feeling the reason behind Apple's doing this (requiring stores to only sell to their local country) is an attempt to avoid running afoul of local laws regarding IP. The original rights holders do get compensated, but oftentimes in a large corporation (like WB, for instance) individual divisions compete against each other in order to avoid being prosecuted for antitrust (this is why antitrust came about in the first place-railroads would buy up all of their suppliers and then trade amonst themselve

    • What if a work is public domain in one country but copyrighted in another? I can see where this would be a problem in relation to 20th century classical music, where the cutoffs for the perpetual copyright regime differ country by country.

      • What if a work is public domain in one country but copyrighted in another?

        Well, one problem with that is that, intellectually, that doesn't make any sense. A book isn't less of a book in a country where it's still covered by copyright (or where it's in the public domain). It's still the same story, the same idea.

        Look at it this way: If you spend two years working in Germany, and buy a bunch of books and CDs, should you be forced to forfeit those when you return home to the US, simply because the copyri

        • So now we've got WIPO and DMCA (and associated anti-consumer isues), but we're still bound by 18th century notions of nationally-defined copyright controls? How crazy is that?

          The Bono Act was supposed to be a step toward solving that for the majority of works, but it takes a few years for the rules of expiration to take effect, especially given that copyright term extensions usually don't remove works from the present public domain.

  • Comment removed (Score:3, Funny)

    by account_deleted ( 4530225 ) on Wednesday September 15, 2004 @09:56AM (#10255745)
    Comment removed based on user account deletion

  • Comment removed (Score:4, Funny)

    by account_deleted ( 4530225 ) on Wednesday September 15, 2004 @10:09AM (#10255844)
    Comment removed based on user account deletion
    • Everything comes at a price, and it's all part of the price we pay for freedom of expression. I wish sometimes it didn't involve Oprah Winfrey fans, but there it is. Besides, didn't the Europeans send all their criminals and religious loonies to the colonies here, unless they were in the government already? They are the ones who should apologize.

      • ... didn't the Europeans send all their criminals and religious loonies to the colonies here, unless they were in the government already ...

        The criminals were sent to Georgia and Austalia IIRC.

        Colonies were often originally settled by corporations, the settlers being a mix of get-rich-quick types and the more aggressive/optimistic ordinary folk tyring to escape the European economic caste system of the 17th and 18th century. Some colonies were originally settled by groups belonging to persecuted reli

  • Currency's fluctuate (Score:3, Interesting)

    by acomj ( 20611 ) on Wednesday September 15, 2004 @10:11AM (#10255869) Homepage
    The Pound/pence/quid or whatever its called these days will fluctuate compared to the Euro. Its conceivable that if the Pound drops in value relative to the Euro the oposite will occur (It will be cheaper in the UK).

    The VAT is an English problem.

    The way to prevent this is to have the UK peg the pound to the value of the Euro (China does this to the dollar). This is not easy. Maybe it Euro time.

    For what its worth some tourist in europe I've heard complaining about everything in England and Switzerland costing more. It might be becuase its different currency your getting gouged on prices becuase its hard to convert/compair

    • Unfortuntely when the UK last tried that (with the pre-euro Exchange Rate Mechanism - ERM) it caused amazing problems, the peg wasn't at the right value (how can you determine the right value?) and the economy really suffered. Finally the UK dropped out of the Exchange Rate Mechanism in September 1992 and the scheme was abandoned.

      The problem with pegging is that the real value of the currencies fluctuate and central banks then need to spend reserves to keep the peg in place, which is fantastically expensi

  • A better question (Score:4, Interesting)

    by MacEnvy ( 549188 ) * <jbocinskiNO@SPAMbocinski.com> on Wednesday September 15, 2004 @10:12AM (#10255882) Journal
    Why doesn't the consumer group go after Napster and OD2, both of which operate in Britain and actually cost up to 20% more than iTunes? Is there some sort of bias in the system here? And it shouldn't be about market share, since in Britain the competition holds a bit stringer against iTunes than in the States. Where is this group coming from (from a backing standpoint), and why no mention of the others?

  • VAT rates are different (Score:5, Informative)

    by wimbor ( 302967 ) on Wednesday September 15, 2004 @10:15AM (#10255901)
    I don't know what exactlty the price difference is between UK and Germany, but for Slashdot readers to form their opinion, please take into account the following:

    - VAT rates are different for different countries in the Euro-zone. I think it is crap as well, but it is a fact of life. Most of the time you have two or three VAT rates on goods. 0% VAT, a basic rate and a high rate. The zero and basic rate are generally applicable to goods that are considered to be "basic necessities", e.g. food. The high rate is for "luxury items", e.g. electronics, perfume, services, ...

    E.g. the VAT rate of books in Belgium is 6%, in the UK it is 0%. The VAT rate on a computer in Belgium is 21% and in Germany 16%. This causes serious price differences. Some companies decide to absorb the VAT differences and hence charge less excluding VAT in one country than the other, to avoid price differences. Others do not.

    I live in Belgium, and it sucks to be in a country where everything execpt food is charged 21% extra... Well, social security is good though...

    Local legislation, wages, taxes, ... are different between countries. The EU is for now still a free-trade zone that uses one single currency (well, the execpt UK and some other country) but it is NOT a single country. This means that you have different laws, taxes, wages, warranty requirements, ea. for different countries. So, necessarily the price that the end counsumer has to pay for a products is different. There is also a difference in shipping costs, between a country as large as Germany, and one as small as Belgium. Warranty on electronics in Germany is 2 years (by law). In Belgium it is 1 year. Translations of manuals for 100 million German speaking people or 10 million French/Dutch speaking also make products in Belgium more expensive. Etc.

    All these factors also causes end user prices to differ between countries.

    I don't think that is fair at all, but it is the way it is... We can only strive for more European harmonisation... I for one, would like to have one single (read 'lower') VAT rate, tax rate, etc... but others (like the UK) are more protectionistic, and don't want the EU to take to much power....

    The last time I checked the price excluding VAT of Apple harware in the Netherlands is higher than in Belgium, so I suspect Apple tries to harmonise the prices between the Netherlands and Belgium

    Exchange rates fluctuate Exchange rates could be the reason for prices differences between the UK and the EU mainland. If the UK wants to avoid that: join the Euro! But, this also means companies like Apple have to hedge against exchange rate differences. (For information on hedging, see google.) Basically you make a contract to buy x amount of EUR in the future at a given exchange rate now. This COULD be safer for a company if it anticipates changing exchange rates correctly, but carries costs as well. These are also factored into the product end price.

    And, as I said before, do not underestimate the wage effect...

    By the way,
    Inter-company trade does not have to pay VAT. VAT is a tax paid by endconsumers (private persons), companies that trade with each other pay VAT on goods they buy, but can redeem this from the tax authority. Companies charge the private persons VAT, and pay it to the government. It is a difficult system, search on google if you want to know more.

    • Inter-company trade does not have to pay VAT.

      That is not entirely true. If a company buys goods for its own use, it has to pay VAT. Only if the goods are intended for resale no VAT has to be paid or the paid VAT can be reclaimed. That way the VAT is only paid once, by the person/entity that uses the product.

      The system is not THAT difficult. As a company, you sum up the VAT included in everything you buy(called Vorsteuer in German) and the VAT for everything you sell(Umsatzsteuer). The difference betwee
      • You are right about the VAT being charged to the end-consumer, even if it is a company. My mistake sorry.

        The system is easy for trade within a country, or simple goods exchanges across borders.

        However, the system is more difficult, because of "triangle-operations" in the EU, and the fact that you have to take care of the 'location' of the service or delivery. In addition to that, every country adopts the same VAT legislation by Europe, but can (within certain boundaries) add or change specific rules. I

  • Price too high? (Score:5, Funny)

    by Anonymous Coward on Wednesday September 15, 2004 @10:29AM (#10256029)
    If your prices are too high from taxes, might I suggest throwing boxes of tea into the Thames?
  • If you don't adopt the Euro like all the other countries in the EU, then what do you expect? Simply the extra overhead caused by having to convert to your defunct currency would probably account for the odd 20 cent on each song.

  • Does it go both ways? (Score:3, Funny)

    by YouHaveSnail ( 202852 ) on Wednesday September 15, 2004 @12:00PM (#10256949)
    So, let's say for the moment that Apple acquiesces and drops the iTunes per-song rate so that it's the same as in France and Germany. Can Apple then get a guarantee from the UK government that the cost of doing business in the UK will be the same as that in France and Germany?

    And why look at just France and Germany, btw? Given that 1 euro is currently worth slightly more than 1 US dollar, you can make a solid case that European customers still pay more than Americans. Will the UK Office of Fair Trade again take Apple to task for charging a higher price in the UK than it does in some other country?

    If I were Apple, I'd take that deal and then insist that workers in the UK charge more per hour than workers in Indonesia, and landlords charge more per square foot than do landlords in Siberia, and ask them to make sure that I got the same deal in the UK that I can get elsewhere.

    Who knows? This could be an end to any problems the UK might currently have with outsourcing. They could call it the "Bring the Third World Home" intiative.
    • Apple iTMS Europe is based in Luxembourg iTunes Music Store is operated by iTunes S.à.r.l., registration number B 101 120. Our registered office is 10 rue Mathias Hardt BP 3023, L-1030 Luxembourg. So Apple are taking advantage of the single market within Europe to ensure that they are paying the lowest taxes on any profits they make. The difference is what they have to pay the copyright holders in each country.
  • the OFT will begin charging 7% VAT on all imported heroin next week.
  • Please stop going on about differences in VAT between European countries - Apple iTunes is based in Luxembourg, and charges the same VAT across Europe.

    Also, iTunes has not been targeted by the Office of Fair Trading. The OFT has been asked to look at it by the CA (the Consumers' Association, publisher of Which magazine.)

  • It's just simple revenge... (Score:3, Funny)

    by pukwudgee ( 688951 ) on Wednesday September 15, 2004 @01:45PM (#10258052)
    They overcharged us for tea, now we're overcharging them for Ice-T

  • Why iTunes Music Store? (Score:5, Insightful)

    by Anonymous Coward on Wednesday September 15, 2004 @02:16PM (#10258350)
    Why is iTMS being singled out? The whole thing reeks badly. Conspiracy theorist in me thinks that there are companies behind this call for probe.

    Consider these 3 paragraphs from a Reuter article [yahoo.com]


    - Targeting iTunes is an odd choice. In Britain, Apple's music service is cheaper -- in some cases more than 20 percent cheaper -- than rivals Napster and most of the online retailers that resell the catalog of music download firm OD2.

    - Graham Vidler, head of policy for the Consumers' Association, said he was not aware of a single complaint from a British consumer about Apple's pricing scheme. "What we are saying is we believe iTunes could be made cheaper," he added.

    - The Consumers' Association said it had no plans to investigate the pricier download services.

    Basically, they summarized that consumers did not feel ripped off by iTMS and yet TCA called iTMS a rip-off. There are other music services with much pricier songs, but they are not rip-offs; iTMS is. Instead of praising iTMS lower price, they called for a probe with words such as "rip-off" while ignoring the pricier download services.

    TCA totally ignores that Apple licensed the songs from the labels which is different from a country to another. Price difference may be the result of the British labels' greed and judging from other services, that is the case. Tell me I am paranoid, but I bet if you look carefully who's behind the complaint, you'll find Microsoft or Napster or the likes of them.

  • Same Old Same Old (Score:4, Insightful)

    by ickoonite ( 639305 ) on Wednesday September 15, 2004 @02:30PM (#10258484) Homepage
    As a Brit and thus, out of obligation/duty/whatever and due to inclement weather, a bitter cynic, I can only laugh derisively at this news and observe that this is the way it always was, is and forever will be.

    Some here have failed to grasp VAT - I can only assume that these people are communists, unfamiliar with taxation systems and the exchange of money for goods. (And, as an aside, should the HUAC get wind of this - you know, harbouring socialists and what have you - CowboyNeal can expect the FBI on his ass. Metaphorically speaking, of course.)
    Others note a strong pound juxtaposed against a weak Euro or dollar, placing their faith in the fluctuation of international currency to balance the situation. I await with some glee the comedown of the pound - in the dollar's case, this necessitates a change of president, I believe, and, alas, in the Euro's case, nothing short of a blue moon.

    The thing is, the UK is fundamentally different from the rest of Europe, a state of affairs brought about more by geography than anything else (the Japanese are similarly afflicted). It will not change. To cite two factors - VAT is lower than the French rate of 19.5% or the Italian one of 20% (if memory serves - corrections welcome) and employment legislation is more company-friendly (contrast our 48 hour working week with France's 35 and note that the Netherlands' figure is similar) - and yet British prices still manage to consistently exceed their continental equivalents - cars have always been a stellar example.

    None of this matters though. Britain is, perhaps by statute, more expensive than pretty much anywhere else - this cynic includes Japan in that sweeping generalisation having had ample opportunity for comparison. In fact, it is surprising that this has got as far as the OFT - normally the Beeb is only able to whet the skeptic's appetite for feeling hard-done-by with stories of complaints by consumers' rights organisations.

    Nothing will change.

    iqu :s
    (If you like my cynical tone, feel free to read my sometimes-updated blog [morisakihe...dustry.net].)

    • Others note a strong pound juxtaposed against a weak Euro or dollar, placing their faith in the fluctuation of international currency to balance the situation. I await with some glee the comedown of the pound - in the dollar's case, this necessitates a change of president, I believe, and, alas, in the Euro's case, nothing short of a blue moon.

      you're not just a cynic, you're horribly uninformed and detached from reality. the EUR is still strong against the pound compared to Jan '01, Jan '02, or Jan '03 level

  • Price is unrelated to production cost. It's determined by what people are willing to pay. If people pay more than what it cost you, you make a profit. If they pay less, you go bankrupt. Apple sees English customers as more willing to pay than French ones. If they're wrong, their music doesn't sell. The market price is the price. Any more or less, and profit isn't maximized, and the company is being poorly managed.
  • I'm not entirely up on the trade laws in the EU, but wouldn't it be possible for UK customers to buy from the German store and duck the extra VAT taxes? I thought the EU was supposed to be one big free-trade zone.

  • You've all missed the point! (Score:4, Insightful)

    by carou ( 88501 ) on Wednesday September 15, 2004 @07:36PM (#10261334) Homepage Journal
    I can't believe what I'm reading here. Some important facts haven't come up in the discussion thus far:

    To sell things in the E.U. there are certain rules you have to obey. As it stands, Apple are clearly not obeying those rules, and so they will lose any legal action which arises. The problem is not that the tracks in the U.K. store are too expensive, but that Apple are actively preventing U.K. consumers from buying tracks from the French store or the German store.

    A company providing goods or services in one E.U. country is not allowed to prevent purchases from people in another E.U. country. This principle of the Common Market exists in E.U. law, and this applies to all those countries which are members of the EU including those which, like the U.K., have not adopted the Euro currency.

    To obey the law, Apple must allow people in the U.K. with a U.K. credit card to purchase songs from the French or German stores (or people in France, should they wish to, to buy from the U.K. store, for example).

    They do not need to allow anyone in the E.U. to buy from the U.S.A. store. Any price comparison between Europe and the U.S.A. is bogus as far as this discussion is concerned. It is not at issue here because the E.U. rules do not apply to the U.S.A. sales operation.

    Apple are being targeted because they have stores selling to the U.K., France and Germany, where the E.U. internal free trade rules apply.

    (My guess is that the record companies are charging more for the rights to distribute the music in the U.K. than elsewhere. This may also be illegal under the same rules. However, I don't suppose Apple want to take the music companies to court, lest they in turn revoke Apple's right to distribute anything... 'tis a sticky situation, and no mistake.)

  • Different pricing in different regions? (Score:3, Insightful)

    by mh101 ( 620659 ) on Wednesday September 15, 2004 @08:04PM (#10261565)
    should we grow up and get used to the fact that things are priced differently in different places?

    I can walk into a store here in Canada and get Simpsons Season 4 for $45 CAD. Or I can take a day trip down to Seattle, and find Simpsons Season 4 for $45 USD. I noticed the same pattern with pretty much all other CDs and DVDs I saw in the US store. The numbers on the price tag in the US are about the same as they'd be back up in Canada - except with the differing dollars, that makes it considerably cheaper in Canada!

    So if Apple's in trouble for selling iTMS songs for 20% more in the UK, should American CD and DVD retailers get in trouble for selling their products for 20-30% more than they're sold for in Canada?

  • eh? (Score:2, Offtopic)

    by GrahamCox ( 741991 )
    overpricing it's iTunes

    overpricing it is iTunes - what does that mean?

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