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Norway, Sweden, Denmark may fine Apple over iTunes

Apple may be fined for operating iTunes in Norway, Sweden and Denmark in the aftermath of a Norwegian Ombudsman ruling that says Apple is doing business illegally. The next target of the consumer group that took the case will be MSN.08 Jun 2006

The Norwegian Consumer Ombudsman has just ruled that the terms and conditions for iTunes are unlawful and has given the service until 21st June to amend them. After that date it will be fined unless it changes its practices. OUT-LAW has learned that parallel cases in Sweden and Denmark could lead to fines across Scandinavia not only for Apple's iTunes but also for Microsoft's MSN.

Sweden and Denmark both have ombudsmen looking into the issue. The Swedish consumer council has filed a similar complaint and observers expect an announcement in the coming days from its Ombudsman. "The contracts, like anglo-american contracts, keep the right at any time to amend the terms of an agreement," said Jonas Adols, legal advisor to the Swedish Consumer Council. "In my eyes that includes everything including price. You would never get away with that before a Swedish court in a business to consumer relationship."

It is understood that though no complaint has been made in Denmark, the Danish Ombudsman plans to issue rulings after following the Norwegian and Swedish cases.

The actions are also about to be widened to include other major music retail names. "After the iTunes issue is resolved we will look at the terms of service in similar stores. The next one we will look at is MSN," said Torgeir Waterhouse, senior advisor at the Consumer Council of Norway, the body that took the iTunes case. "The digital rights of consumers have been dictated by the industry for a long time. This decision marks the start of a struggle to recover them."

The Ombudsman, whose decisions have the status of court rulings, said that the terms of agreement with iTunes were unreasonable with regard to the Norwegian Marketing Control Act. It said that Norwegian, not English, law must govern the agreements and that iTunes cannot disclaim liability for damage done to machines by its software. The company has until 21st June to comply with the ruling.

The ruling also said that the digital rights management (DRM) which attaches to iTunes songs may not be legal since the only portable device that can play the purchased material is Apple's iPod. Apple has until 21st June to respond to this decision, a less severe ruling which recognises the importance of iPod sales to the iTunes business model.

"This leaves iTunes with three options," said Waterhouse. "They can leave the market, change their terms or operate the same as before, but the Ombudsman can impose some pretty heavy fines."

Apple has the right to appeal to the Norwegian courts system. The company has told the Norwegian press that it does not intend to leave the Norwegian market and that its lawyers are working on the issue now, but refused to comment on the digital rights management question.

Gavin McGinty, an e-commerce specialist with Pinsent Masons, the law firm behind OUT-LAW, said that Apple's behaviour was uncharacteristic. "Apple has traditionally been very good at managing these sort of risks, which is partly why you can only use iTunes in selected countries" he said.

"They have clearly thought about some of the issues before they started to sell in Norway, but it looks as if they didn't go quite far enough. When you start to sell in a new country you need to do more than just translate your terms and conditions into the right language. Each country has different consumer laws, so you also need to get the terms checked over by a lawyer in that country to make sure that they are fully compatible. Getting this done doesn't usually cost very much and, as Apple are finding out, it can save a lot of trouble and money down the line."

Apple declined to comment on this story. 

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