Brussels to target Apple's iTunes site

Apple and several big music companies are facing a European Commission antitrust probe after Brussels issued formal charges alleging that the deals underpinning the sale of music through the hugely popular iTunes platform violated competition rules.

In a surprise development, the Brussels regulator last week sent a confidential statement of objections to Apple and "major record companies". These are understood to include Universal, Warner, EMI and Sony BMG.

The European Commission's confirmation of the action comes as Steve Jobs, chief executive of Apple, was in London for a joint press conference with Eric Nicoli, head of EMI, who announced he would be making its music available on iTunes online without copyright protection. EMI is the first record "major" to remove digital rights management - the copyright protection that prevents piracy from its catalogue.

The Commission's main concern is that iTunes' set-up in the European market prohibits users in one country from downloading music from a website intended to serve another. Its move was triggered by a 2004 complaint from Which?, the UK consumer organisation, criticising the fact that the UK version of iTunes was more expensive than the version in other European markets.

A spokesman for Neelie Kroes, EU competition commissioner, said Apple's agreements restricted "music sales in the sense that consumers can only buy music from the iTunes store in their country of residence" and that consumers were therefore limited "in their choice of where to buy music and, consequently, what music is available and at what price". He said: "The Commission alleges that these agreements violate the [EU] treaty's rules prohibiting restrictive business practices." Brussels stressed that its allegations had nothing to do with the lack of interoperability between the iTunes format and rival players.

The Commission is now pursuing antitrust investigations against three of the biggest names in US technology.

Brussels has already imposed heavy fines against Microsoft in a probe that started almost nine years ago. The US software group was eventually found guilty of abusing its dominant market position and has been fined close to €780m (£527m) so far.

The Commission is separately pursuing a case against Intel, the chipmaker, which Brussels believes has undermined competition from AMD, its only rival.

Should the Commission find Apple and the music companies guilty of breaking competition rules, they would face potentially painful financial sanctions. The regulator has the power to impose fines worth up to 10 per cent of a company's worldwide annual turnover, and has recently toughened up its policy on fines.

But the regulator could also opt for other remedies, for example forcing the groups to change iTunes' policy in order to allow consumers to access all European websites legally.

The groups will now be given the chance to defend themselves both in writing and during a hearing in Brussels. People familiar with the case expect the groups to argue that copyrights are currently awarded and administered on a national basis, making it difficult for national iTunes websites to sell songs across borders.