French law on iPod, iTunes takes effect

By Angela Charlton

updated 5:39 p.m. ET Aug. 3, 2006

PARIS - A closely watched French law that lets regulators force Apple Computer Inc. to make its iPod player and iTunes online store compatible with rival offerings went into effect Thursday.

The Internet copyright law passed France’s parliament June 30 after fierce debate and a gradual weakening of its initial punch. Apple had called an early draft “state-sponsored piracy,” and some analysts have said the law could force Apple to close iTunes France and pull its market-leading player from the country’s shelves.

But the law was expected to have little immediate effect. A new government regulatory authority assigned to monitor the law is not expected to be in place until this fall. Much will depend on the law’s interpretation by the French courts, as well as the stance taken by recording companies.

The law was initially crafted as an effort to crack down on piracy and level the playing field for smaller rivals to companies such as Apple and Sony Corp. Apple argued that opening its formats would further encourage pirates.

Currently, songs bought on iTunes can be played only on iPods, and an iPod can’t play downloads from other stores with similar premium content from major artists — like Napster Inc.’s service or Sony’s Connect.

Apple did not respond to multiple messages seeking comment Thursday.

Other governments may follow France’s example. Recent proposals or regulatory moves to open up iTunes have emerged in Britain, Sweden, Denmark, Norway and Poland.

The original French law would have required companies to share technical data with any rival that wanted to offer compatible music players and stores. But France’s Constitutional Council left it up to government regulators to decide on a case-by-case basis whether to force companies to open their formats.

The law allows the companies to seek compensation for sharing their technologies.

Even with the promise of compensation, said analyst Tim Bajarin of Creative Strategies, Apple “would be highly hesitant” to open up its format. Still, Bajarin said the council’s changes “give a lot of latitude” and could make it easier for Apple to resist.

The law also has a loophole that could allow Apple and others to dodge the technology-sharing demands by striking individual deals with record labels and artists.

Apple has already rebuffed Scandinavian consumer agencies making similar compatibility complaints.

The consumer agencies in Norway, Sweden and Denmark have said the Cupertino, Calif.-based company was violating contract and copyright laws with its product usage restrictions. They were considering taking the case to court, possibly seeking an injunction banning iTunes from their markets.

In a letter, Apple indicated it was not willing to change its business model by opening its iTunes downloads to rival portable players.

Torgeir Waterhouse of the Norwegian consumer agency said Thursday that “there’s still a long way to go before iTunes Music Store gives the consumers a fair treatment.”

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