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updated 12/13/2006 5:03:23 PM ET 2006-12-13T22:03:23

Electronics manufacturers on Wednesday threatened legal action to force European governments to drop an extra charge on iPods and blank CDs after EU regulators backed off a plan to reform copyright levies.

The threat came as the European Commission suddenly backed away from plans to reform the system.

Artist rights groups in most European countries charge copyright fees on blank discs, data storage and music and video players.

The money is used to compensate artists and copyright holders for legal copying such as, for example, when listeners burn an extra version of an album to play one at home and one in the car. In some countries, a portion of the money also supports cultural projects, from sponsoring festivals to paying scholarships.

Manufacturers claim the "unjustified and illegitimate" levies unfairly raise the retail price of their products and now that digital copyright technologies are being introduced to protect against illegal duplications.

Artists rights' groups say these charges are small in comparison to overall costs and help fund new work.

The levies are charged in 19 of the EU's 25 nations. None is charged in Britain, Ireland or Cyprus, and different plans exist in Greece, Luxembourg and Malta.

Both sides lobbied hard as the European Commission readied to roll out its reform, saying in November it was concerned that fees vary widely from nation to nation and that some people might be double charged, paying a fee to download an iTune fee and a second levy for a blank CD.

But on Wednesday, the commission said it needed "more reflection" on a complex issue, denying that it was pulling the plan under pressure from the French government, but refusing to say if or when it might re-emerge.

French Prime Minister Dominique de Villepin wrote to the EU Commission President last week, saying he "would very much appreciate" putting the plan on hold.

The Copyright Levies Reform Alliance — which represents companies from the technology and recording industries — said the decision not to act now effectively kills the reform for the next three years.

The group said the situation will force some of its members — "several major European household names" that it would not name — to file complaints next year that could oblige the European Commission to take action against countries like France and Germany for breaking EU copyright law by charging customers twice.

CLRA spokesman Mark MacGann told reporters that the industry wanted legal certainty because manufacturers cannot sell goods across Europe as the same price. The levy adds 2 euros ($2.65) to the cost of an iPod 30GB in Finland and 90 euros ($119.39) in Spain, he said.

"We can't bring a new product on to the market in the hope that it will be treated the same in France as in Germany as in Spain," MacGann said. "It is clear that John Smith who buys his iPod in London is indirectly subsidizing the acquisition of the iPod by Juan in Madrid or Jean in Paris."

An AP survey of the cost of an iPod Nano 4GB does not show a clear drop in pre-tax prices among euro-currency countries that do and don't charge the levy.

Before sales tax, the French cost of the iPod is 174.74 euros ($231.79), the Spanish price tag is 171.55 euros and Germany's is 167.16 euros. In Ireland — which has no levy — the same model is 172.73 euros before tax. In Spain and France, the levy runs 8 euros ($10.61).

Sales tax varies widely across Europe from 16 percent in Spain to 21 percent in Ireland so the final cost of that iPod is 199 euros in a Madrid store and 209 euros in Dublin.

A bigger difference can be seen in contrast with other parts of the world. Before tax, the iPod Nano costs $171.55 (129.33 euros) in the United States through Apple's online store. That and the strong euro mean European Christmas shoppers can find major savings on iPods when traveling to the United States.

CLRA blames the levies for this wide price gap.

"I think consumers have to start asking why the equivalent comes to the market later than in the United States and why MP3 players, printers and PCs cost significantly more than in the United States apart from the value added tax issue," MacGann said. "Levies are a rough justice system that hurt industry and do hurt consumers."

He said many European countries will see a long delay before high-definition DVD hits their shop shelves, saying copyright groups' plans to charge a levy on BluRay discs and players was stopping manufacturers in their tracks.

"The financial impact on certain manufacturers is too great. They prefer not to enter certain markets," he said.

But Veronique Desbrosses of European copyright group GESAC argued that levies amount to only a small proportion of the overall cost of products and helped give artists an income they need to keep producing work.

"It's fair for rights holders to receive a small amount of money for this copying," she said. "It's an asset to have creators that can live from their work."

She dismissed CLRA's claim that people are paying twice, saying most iPods are filled with privately copied music, not tracks downloaded from iTunes.

Copyright 2006 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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