Apple has announced that it will cut the price it charges for music downloads in the UK from its iTunes music store within the next six months.
Music downloads in the UK will be cheaper within six months
The cut will bring the UK into line with the charges in the rest of Europe.
Apple currently charges 79 pence per download in the UK, compared with 99 euro cents (74p) in the rest of Europe.
European Union regulators began investigating iTunes last year after the consumer group Which? complained about its pricing policies.
Which? originally lodged its complaint with the EU in 2004.
Apple is now taking action against record labels that charge more to distribute music in the UK than in the rest of Europe.
"Apple will reconsider its continuing relationship in the UK with any record label that does not lower its wholesale prices in the UK to the pan-European level within six months," the company said in a statement.
EU Competition Commissioner Neelie Kroes welcomed the move, saying that it would "allow consumers to benefit from a truly single market for music downloads".
A Commission spokesman said the settlement had been the result of direct talks between Ms Kroes and Apple boss Steve Jobs.
The EU was investigating whether the iTunes store violated its competition rules because each country had its own store and consumers were only allowed to download music if they have a credit card from a bank registered in that country.
Apple said it could not have a single European iTunes store because of copyright problems, and contractual restrictions put in place by record labels.
"We hope other internet companies, including online music companies, will follow Apple's lead and match UK prices to prices in continental Europe," said Which? lawyer Chris Warner.
According to the Commission, "prices for iTunes downloads in the UK are currently nearly 10% more expensive than downloads in the euro zone".
"Following iTunes' announcement, UK consumers will soon pay the same for music downloads from iTunes as customers from euro-zone countries," it added.
But the BBC's European Business reporter Dominic Laurie said under EU copyright law, agreements can be negotiated along national, rather than community-wide lines.
"This means music download sites are able to offer different songs at different prices in each member state they operate in," he said.
"Until that changes, customers will still find it hard to take their business across international boundaries."
Even after the changes, European downloads are still significantly more expensive than those in the US where they cost 99 cents (50p).
Apple is currently locked in a competitive battle with other music download stores.
The big issue in music downloading is Digital Rights Management (DRM) software, which can prevent tracks being copied to multiple digital devices and burned onto compact discs.
Some tracks on iTunes are available without DRM, but most are not.
Amazon's digital music store, in contrast, only sells tracks that do not have digital protection.
Sony BMG recently launched a website in the US called MusicPass, which allows consumers who buy pre-paid cards to download tracks without DRM.