Apple faces a fine of more than £300 million after the European Commission issued a formal objection to the higher prices it charges to download music from iTunes in Britain compared with the Continent.

The threat, uncovered by The Times last night, took the gloss off a major announcement that the company is to sell iTunes tracks free from anti-piracy measures.

Apple, the dominant digital music retailer and the maker of the iPod, charges 79p in Britain for a song and 99 euro cents in Europe. On current exchange rates the equivalent of the European price would be 67p.

Steve Jobs, the chief executive of Apple, agreed to sell songs from EMI’s artists, who include Coldplay, Lily Allen and the Rolling Stones, for 99p, in return for EMI giving up software protection designed to prevent illegal copying and sharing. The same songs will be available in Europe for €1.29, equivalent to 87p.

The commission said that it objected to Apple’s practice of making consumers buy songs from the iTunes shop in their home country. As a result, it said: “Consumers are restricted in their choice of where to buy music, and consequently what music is available and at what price.”

The timing of the Apple-EMI partnership indicates how important it is for Apple to side-step growing regulatory pressures stemming from the success of iTunes and iPod. It has sold 90 million iPod players and two billion iTunes tracks. Companies found in breach of competition law face a fine of up to 10 per cent of annual turnover, which would be about £323 million.

EMI said last night that it did not believe it had breached European competition law, and would be making its case strongly to the commission.

Yesterday’s announcement of the sale of premium quality digital tracks free from antipiracy controls, was a big gamble for EMI and Apple. From May, iTunes customers will be asked to pay the 99p fee to download tracks of a higher sound quality than the standard 79p versions. They will be capable of being played on rival devices to the iPod after the removal of the digital “locks” that prevent them being copied and distributed over the net. EMI, whose catalogue includes Queen and Pink Floyd, is the first big label to offer its catalogue online without antipiracy technology, called Digital Rights Management (DRM). Illegal downloading has cut profits at the British-owned company, which is the subject of takeover speculation.

EMI bosses concluded that action was necessary to kick-start a market that has failed to compensate for the decline in CD sales. Eric Nicoli, EMI chief executive, said: “The best way to combat illegal traffic is to make legal content available at decent value and conveniently. Consumers tell us they would be prepared to pay a higher price for a piece of music they can play on any player.”

Customers of iTunes may be suprised to learn that they have so far been denied a superior listening experience. The premium tracks promise the equivalent sound quality of a CD, but the higher-quality files reduce the amount of tracks a user can store on their portable player.

Mr Jobs predicted that other record companies would follow EMI’s lead. The market leader, Universal Music, is uncertain if EMI’s deal will increase the overall market, because it may encourage piracy. David Pakman, chief executive of eMusic, iTunes’s closest sales competitor, said: “DRM has held this market back so this is very good news. But even without DRM, iTunes files are still not compatible with a number of popular digital players.”

The European Commission inquiry is likely to drag in all the main music labels, including EMI.

Online options

Apple iTunes

79p single track — with digital locks and at 128kbps sound quality 99p premium EMI track — no digital locks and 256kbps quality EMI album prices unchanged with no locks and all at 256kbps

eMusic.com

£8.99 for a one-month subscription; download 40 songs to own at 22p a track

Napster

£14.95 a month to transfer any music downloaded from 3 million song catalogue to non-iPod portable players. Albums to own for £8.

3 Music Store

Mobile users download tracks for 99p. Tracks convertible between mobile and PC.

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