Apple abandons e-book agency model in EU

As the European Union (EU) last December started looking into claims that Apple was conspiring with publishers to raise e-book prices, Apple and several major publishers agreed last month to offer pricing concessions in an effort to end an EU antitrust investigation. Back in the U.S., a federal judge approved settlements with three publishers and the Federal Communications Commission.

Following that decision, EU officials are willing to market test commitments proposed by Simon & Schuster, Harper Collins, Hachette, Holtzbrinck and Apple for the sale of e-books that would give retailers the freedom to set prices freely for the next two years…

According to a media release issued earlier today by The European Commission, the proposed commitments “aim to alleviate concerns that these companies may have engaged in an anti-competitive concerted practice affecting the sale of e-books in the European Economic Area (EEA)”.

Of course, should the Commission’s worries prove valid, it could make them legally binding on the companies.

The Commission considers at this stage that these companies may have breached EU antitrust rules that prohibit cartels and restrictive practices by jointly switching the sale of e-books from a wholesale model to agency contracts containing the same key terms (in particular an unusual so-called “Most Favoured Nation” – MFN – clause for retail prices).

The agency model allows more control by publishers over retail prices. The Commission has concerns that this switch may have been the result of collusion between competing publishers, with the help of Apple, and may have aimed at raising retail prices of e-books in the EEA or preventing the emergence of lower prices.

Apple and the four named publishers offer to terminate existing agency agreements and refrain from adopting price MFN clauses for five years.

What happens when any of the four publishers theoretically enters into new agency agreements is that retailers are automatically given the freedom to set prices for two years, “provided the aggregate value of price discounts granted by retailers does not exceed the total annual amount of the commissions that the retailer receives from the publisher”.

Granted, it’s a legal mess. And as such, it can get confusing more often than not.

What you need to know is that Apple is proposing a settlement similar to the one back in the United States, which entails termination of e-book agency pricing contracts while giving publishers freedom to set prices for the next two years.

I know you just want to read e-books (just as I do) and that you may be bored by this legal stuff, but regulators obviously think Apple and publishers convoluted to fix prices.

Perhaps that’s not such a far-fetched notion?