The transition to the agency model could be halted as publishers outside of the new terms could wait as much as a year for an Office of Fair Trading investigation into e-book pricing to be completed.
The OFT announced this week it would investigate whether the model breaches competition rules after a “significant” number of complaints.
It is unclear how long the investigation will take although several publishers claimed it could take as much as a year. Faber digital director Jason Cooper said: “It seems unlikely to me that those publishers who haven’t signed up to the agency already will do so now until there is greater clarity as to its legal status.”
A publishing house c.e.o. said: “After reading it could take a year for the investigation to be completed, I feel this leaves me with a dilemma for the company. I don’t know if I would be able to wait for a year to decide to use agency pricing or not, because in this time I could have lost out on sales from Apple’s iBooks.”
Another senior publisher added: “People who have not signed up for the agency agreement will tend to await the outcome of this investigation. It would be pointless having to renegotiate contracts with all the other e-book suppliers to conform with agency terms only to have to do it all over again.”
When it launched the investigation on Tuesday, the OFT stressed it was at “an early stage and it should not be assumed that the parties involved have breached competition law”. Hachette, HarperCollins and Penguin, all currently implementing the model, confirmed they are involved in the investigation. Both Waterstone’s and WH Smith said they will be co-operating with fully with the OFT. Other publishers contacted over the investigation, as well as Amazon and Apple, declined to comment. Publishers on the agency model are understood to represent more than a third of e-book sales.
As the investigation begins, it is understood that publishers will be asked to submit documents to the OFT relating to the agency model agreement. One publisher said: “We received an information request [from the OFT], basically asked to trawl through everything pertaining to the deal. It’s not unexpected but it seems a bit misguided. We are pretty confident as we went into all of this before we did the deal.”
Solicitor and competition consultant Vivienne Robinson said the OFT would have sufficient powers to bring “a competition breach to an end”. If the agency model was found to be in breach of competiton laws, the OFT would dictate fines or sanctions. The maximum fine that can be imposed on a party found to be in breach of the competition rules is 10% of worldwide annual group turnover, though Robinson added they do not often reach this level. She added: “The production obligation can be very burdensome, and costly in terms of legal fees.”
It is unclear who made the complaints to the OFT, though there have been vocal opponents to the model, including Amazon.co.uk. In a letter posted on its Kindle forum in October 2010, the internet retailer called the model “damaging for readers, authors, booksellers and publishers.”
Meanwhile, Mark le Fanu, general secretary of the Society of Authors, voiced concerns over the investigation, stressing the model was largely seen as being of benefit to authors. He added: “Amazon has probably encouraged opposition to the agency model . . . I suppose I’m not entirely surprised that the OFT has shown an interest considering the amount of publicity whipped up.”