Memo #11-Apple and Norway: an antitrust issue?
Many of you may have followed the recent EMI-Apple agreement to being selling music through the iTunes music store that is unencumbered by Digital Rights Management ("DRM") restrictions. My focus is on the response made in Norway to this new deal. Why Norway, you may ask? Well in the last year, the Norwegian Consumer Council lodged a formal complaint against Apple with the Norway Consumer Ombudsman. The charges were related to Apple's use of FairPlay DRM to protect music files downloaded from the Norway version of iTunes (Apple has long differentiated the iTunes Stores based on country of origin of the purchaser--the reasons and capabilities to do so is beyond the scope of this entry). The charges stated the FairPlay system violated Consumer Protection laws for Norway. n.1 By imposing FairPlay on the music bought through the iTunes Store, and technologically limiting playback of FairPlay-wrapped music files to the iTunes program and the iPod, the consumer is concerned with anti-competitive tying of the two products. Other Charges include the limited liability Apple would face in the country for security holes created by the FairPlay system and that the End User License Agreements ("EULA") imposed by Apple violate Norwegian law because a consumer in Norway cannot be forced to accept the choice of law provisions contained in the EULA. n.2
This is an interesting series of arguments because of a single, fundamental issue. What happens if Apple simply pulls up stakes in Norway and simply refuses to deal with Norwegian consumers? Nothing that I have been able to find would preclude Apple from simply dropping any and all support for the Norway version of iTunes, either in a technological or legal sense. There of course would be ramifications from such a move. Boycotts of other Apple products sold in Norway; outright rejection of the iPod in the country; support found in other European countries leading to a greater boycott of Apple; and of course, the public relations backlash related to the move. However, the major issue remains. The Norwegian consumer would be harmed by losing full access to one of the few competitors in the legal music download market. This concern is found in the fact that the Ombudsman has established a September deadline for Apple to respond to these charges with ways of improving the store for fairness. It is legitimate to think that the Ombudsman is hoping for additional pressure to be placed on Apple (such as the European Union antitrust forces going after Apple on their own) which will prevent Apple from simply withdrawing from the Market. For evidence, see the praise given by the Ombudsman to Apple and EMI for taking this first step towards removing DRM, for the ombudsman fails to mention concerns that the music will be sold as AAC files (which only a few players support as of now) and the higher prices being charged (which also provides higher bitrates). These issues were not mentioned by the ombudsman.
Thus, it is clear that attempting to enforce a stronger antitrust/consumer protection then what is found in the home country of the company raises serious questions about the unintended consequences. If a firm does not want to be subject to the antitrust laws of a country, and can economically afford to withdraw, then there is nothing to prevent this action, resulting in greater harm to the consumers the laws were designed to protect.


1. AppleInsider.com, Norwegian official applauds Apple-EMI deal, asks others to follow, April 2, 2007, http://www.appleinsider.com/article.php?id=2625
2. AppleInsider.com, Norwegian consumer group opposes iTunes TOS, June 7, 2006, http://www.appleinsider.com/article.php?id=1792