EU investigating if publishers conspired with Apple on e-book pricing

Apple logoThe European Commission announced on Tuesday that it has formally begun an investigation into claims that publishers colluded with Apple to keep e-book prices high, in violation of EU anti-competition rules. The announcement comes after the Commission raided European offices of five international publishers in March in conjunction with the UK Office of Fair Trading.

The five publishers under investigation include Hachette Livre, Harper Collins, Simon & Schuster, Penguin, and Macmillan. The Commission wants to determine if the publishers have "possibly with the help of Apple" engaged in anti-competitive practices, particularly through the "agency agreements" that Apple uses with publishers and others to sell media via its iTunes Store.

Prior to Apple's launch of the iBookstore, publishers typically sold e-books to Amazon or other resellers at a specific wholesale price. The resellers could then offer the e-books for any price they liked—in some cases, well below the wholesale cost. Apple, on the other hand, allows publishers to set whatever price they like, and simply collects a 30 percent fee.

"The Commission has concerns that these practices may breach EU antitrust rules that prohibit cartels and restrictive business practices," it noted in a statement.

Publishers were reportedly "terrified" that Amazon in particular was depressing prices of e-books by selling them at a loss or well below market value. Apple's agency model gives publishers control over retail prices that they lacked with Amazon, though the agreements reportedly had provisions to offer certain bestsellers for comparable discounts. In any event, publishers successfully pressured Amazon to adopt a similar agency model as well, effectively ending Amazon's practice of offering bestsellers for as little as $5 for its Kindle e-reader devices.

The same five publishers named in the EC's investigation, as well as Apple, were recently on the receiving end of a class-action lawsuit making similar claims of price-fixing and anti-competitive behavior.

"Fortunately for the publishers, they had a co-conspirator as terrified as they were over Amazon's popularity and pricing structure, and that was Apple," attorney Steve Berman said of the lawsuit. "We intend to prove that Apple needed a way to neutralize Amazon's Kindle before its popularity could challenge the upcoming introduction of the iPad, a device Apple intended to compete as an e-reader."

Apple recently expanded iBooks availability to 25 countries across Europe.

Source: Ars Technica

Tags: Apple, legal action

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