April 3 (Bloomberg) -- European Union regulators accused Apple Inc. and the world's largest music companies of restricting consumers' choices by forcing them to buy music from the iTunes online store in their country of residence.

The distribution agreements between Apple and major record companies are restrictive and break EU law, the Brussels-based European Commission said. Apple's iTunes checks which country consumers live in through their credit card details, the EU said.

``The very fact that you are unable to buy the same tune for the same price or you are unable in some cases to buy the same tune at all is a problem for us,'' Jonathan Todd, a commission spokesman, told reporters today. ``This is an arrangement that is imposed on Apple by the major record companies.''

Universal Music Group, the world's largest record company, EMI Plc and Warner Music Group said they have been contacted by the EU. Apple, maker of the best-selling iPod media players, has sold more than 2 billion songs since starting iTunes in 2003, making it the most popular legal site for music downloads.

``I don't think this is a problem caused by the record companies,'' Jay Cooper, an attorney with Greenberg Traurig in Los Angeles who specializes in entertainment law, said in an interview. ``ITunes is setting the prices.''

The commission can fine companies as much as 10 percent of sales for violating antitrust regulations.

Apple, based in Cupertino, California, and the record companies have two months to reply in writing to the commission's formal objections. The companies can also ask the commission, the 27-nation EU's antitrust regulator, for a hearing.

Single Market

``Apple has always wanted to operate a single, pan-European iTunes store accessible by anyone from any member state, but we were advised by the music labels and publishers that there were certain legal limits to the rights they could grant us,'' Apple said in an e-mailed statement today.

``We don't believe Apple did anything to violate EU law,'' the company said. ``We will continue to work with the EU to resolve this matter.''

Shares of Apple rose 85 cents to $94.50 at 4 p.m. New York time in Nasdaq Stock Market trading. They have gained 11 percent this year.

``We do not believe we have breached European competition law, and we will be making that case strongly,'' said Amanda Conroy, a spokeswoman for London-based EMI.

Apple and EMI yesterday said they plan to offer songs by EMI artists on iTunes without the restriction of copyright protection software.

U.K. Complaint

Universal, owned by Vivendi SA, is ``completely satisfied that we have complied with all applicable laws and will respond in due course on the issues raised in the document,'' the company said in a statement sent by spokesman Adam White.

Will Tanous, a spokesman for New York-based Warner Music, declined to comment beyond confirming the company had been contacted. Paul Bursche, a spokesman for New York-based Sony BMG, declined to comment.

The commission announced a pricing probe in February 2005 after the U.K.'s Office of Fair Trading referred a complaint by a consumer group to the EU regulator. The group, known as Which?, complained that Apple bars British customers from buying songs from French and German iTunes sites, where prices are lower.

``Consumers are thus restricted in their choice of where to buy music, and consequently what music is available, and at what price,'' the commission said in its statement today.

Comparing Prices

A song costs 99 euro cents ($1.32) to download from an iTunes online store in a nation that uses the euro currency, according to the commission. By contrast, in the U.K. it costs the equivalent of 1.17 euros and in Denmark 8 kroner, or 1.07 euros, the regulator said.

Cooper said European consumers should have the right to shop in different countries' iTunes stores. ``It's one free market,'' he said of the EU.

The iTunes service has more than 70 percent of the market for music downloads, according to researcher NPD in Port Washington, New York.

``The statement of objections does not allege that Apple is in a dominant market position and is not about Apple's use of its proprietary Digital Rights Management (DRM) to control usage rights for downloads from the iTunes online store,'' the commission said.

To contact the reporter on this story: Anna Jenkinson in Brussels at ajenkinson@bloomberg.net; Don Jeffrey in New York at djeffrey1@Bloomberg.net.

Last Updated: April 3, 2007 16:15 EDT