Posted by: bklunk | April 14, 2007

Are The Beatles Available Yet?

Hey.  Read this post!

The EU anti-trust policies on Apple « Who Cares About International Relations?

When was the last time you downloaded a single on Itunes? Originally made from a mp3 player only compatible with Macs, Itunes have evolved into being compatible with windows as well, becoming a multinational corporation. In recent news, an article on USAtoday ( click here ) states that the European Union has launch anti-trust policies on the Itunes company which if passes, it would result to fines up to 10% of of the company’s worldwide annual turnover.

The European Commision states that Itunes violated trading policies due to their limits on what digital players can play music downloaded off itunes. Apple spokesmen Steve Dowling denies this and wants to come to terms with other companies to resolve the issue. One of the latest agreements were with EMI.

When evaluating this article you can see how international polices can greatly effect the way businesses are run. By Keynesian theory, by having government regulation and interference with markets (in this case music) equity and efficiency are provided most effectively. The European Union’s competition polices are there to promote trade and communication amoung companies, making sure that no one company overly take advantage of smaller ones. When Itunes migrated into Europe, their ability to download music and play it on the ipod, caused there to be havoc amoung other comanies as profits were drawn towards buy Ipod’s rather than their products. Thus this case came to be. By Adam Smith’s capitalist theory though by having markets be the forces by the concept of the “invisible hand” consumers will benefit the most and the market system would operate most efficiently. Many economists who value out the moral issues of equity (a purely political issue) would agree that by capitalist theory it would create a higher booming economy and standard of living. If Itunes were able to operate by itself, consumers would be given the best possible product as competition would drive companies to pursue these goals to attact more demand. Capitalism of course is inefficient with income distribution and thus, can create many problems. Thus the complexity of international policies must take place, and so it did as the EU tries to protect local music companies.

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Responses

  1. I’ve read a little bit about this story, and I think that it is a perfect example of how governments try to force business to bend to their conception of “ideal” competition. Yes, I suppose that it is a tad “unfair” that Apple developed better software (iTunes) and hardware (the iPod) than its competitors. It is even more “unfair” that Apple had the foresight and business acumen to engineer those two products in such a way that they interact seamlessly with one another. The outrage!

    Perhaps I am being a bit facetious, but I think that my point is valid: businesses constantly innovate, and innovation always benefits the consumer. That precept applies in this case. Consumers around the world have embraced the iPod and its accompanying software. As the author of the blog post mentions, plenty of Windows users have chosen to buy an iPod knowing full well that compatibility with other formats of music is not guaranteed.

    Is this a problem? I don’t think so. Consumers have the power in this situation. If they did not like how Apple has chosen to limit what iPod users can do with the product, those same consumers can choose to take their business elsewhere. But, the fact remains, Apple has invested the time, energy, and money in its products, and the company should have the right to do what it wishes with them. I think that Europe’s latest anti-business measure will backfire; if I were Apple, I would forego the European market entirely. But that’s just me.

  2. I think Eric has it spot-on here. Consumers are the ultimate decision makers here. If they are dissatisfied with the product and its limitations (itunes’s inability to provide songs compatible with other players), then they will choose to buy something that does not have those limitations. At this point, they are pleased to accept those limitations for whatever makes them satisfied with they product. It is important to consider the product itunes has produce as defined subjectively—here I think the EU would like to define the product as an MP3 player, and as a sales service of downloadable songs. But if we think instead in terms of the particular device that Apple created, it may not fit into the precise definition of simple mp3 player. itunes could instead be considered to contain a proprietary audio-file encryption, because it does. These are technologies that Apple is under no obligation to change. We can think of Sony’ proprietary formats such as memorystick or betamax to see what happens when consumers are dissatisfied: product failure. Instead of squabbling for the right to create what Apple has already, companies should work to create something consumers will want more.

    I don’t think that Apple should necessarily forego this market, though. To try and regulate out a foreign company in this manner is a type of protectionist policy for the E.U., and will not ultimately benefit it. If Apple persists, the benefits will prove greater than the costs it incurs in persisting.

  3. Being that Apple is a foreign company to Europe, I believe that though Apple can contribute greatly to the overall consumer satisfication, it doesn’t give them the right “to do what it wishes with them.” Yes, they have invested the time, energy, and money in their products to satisfy their customers, but this is simply an issue for the economist. If the market was able to operate by itself for the sake of economic boom, then yes Apple should have to right to do what so ever they want in the foreign states. But like how US is trying to protect its domestic business for the booming chinese markets, the European Nation has every right to protect its own economy as well. Market failures must be avoided and thus, when Apple invested in Europe they must know the rules and regulations before doing so, or else they might be sued. Though this might seem a bit extreme, Europe has every right to exercise their regulation on FORIEGN corporations, whether there should be any regulation on (domestic) businesses at all in Europe is another issue that is not relevant. And so, it was the right thing for the European Union to place these policies on Itunes. We all might not know this, but this might be better for consumers, as competition between Itunes and other companies will result to more benefits to the consumer.


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