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EC e-book probe could impose major fines
09.12.11 | M J Deschamps and Keith Nuthall
The five publishers being investigated over e-book pricing could face fines of many millions of euros if they are found to have engaged in anti-competitive practices by the European Commission.
Hachette Livre, HarperCollins, Simon & Schuster, Penguin and Macmillan—the five founding agency model publishers—were named by the EC earlier this week, as it formally took over the investigation into fixed digital pricing after the Office of Fair Trading decided to drop its own probe.
The EC said it was investigating whether these firms "have, possibly with the help of Apple, engaged in anti-competitive practices affecting the sale of e-books in the European Economic Area, in breach of EU antitrust rules".
The EC launched its initial probe in March this year, shortly after the OFT announced its own inquiry, with raids on several European publishers, many of them based in France. Many publishers suspect that Amazon, which has publicly and privately resisted agency terms, has lobbied the competition authorities into opening the investigation. There are similar ant-trust cases pending in the US, including a number of private suits from individuals who believed they have paid too much for e-books.
According to a spokeswoman for the European Commission's DG Competition, the Commission can conduct inspections "either following complaints or on its own incentive” but she would not say why the Commission carried out the unannounced inspections earlier this year. However, the spokeswoman added: "We've analysed the research of our inspections, and now the Commission is opening a formal investigation to decide . . . whether these companies engaged in anti-competitive practices."
She added that there was no timetable for when a decision may be reached. Deadlines are not formally set for antitrust investigations, as the duration of the investigation depends on a number of factors including the complexity of the case, and the number of companies involved. The fines can be huge—they aim to be a deterrent and confiscate additional earnings companies have made over and above their income in a freely competitive market.
Publishers spoken to by The Bookseller acknowledged that the investigation was taking place. "Penguin has taken note of today's announcements by the EU Commission and the UK Office of Fair Trading related to the publishing of e-books. Penguin welcomes the OFT's decision to close its investigation,” said an official statement from the company. "As the EU Commission said, the fact that it has initiated proceedings does not prejudge the outcome of its investigation. Penguin does not believe it has breached any laws, and will continue to fully and openly cooperate with the Commission." Hachette Livre declined to comment, while a HarperCollins spokesperson told The Bookseller simply: "HarperCollins is cooperating with these investigations."
Brussels consults an advisory committee based of member states representatives before making any key decisions on antitrust matters, and cases can be appealed to the European Court of Justice (ECJ), which ultimately has the final say.
The US Justice Department confirmed on Wednesday (7th December) that it was conducting an investigation into the electronic book industry, a day after the European Commission announced a similar probe. Acting assistant attorney General Sharis Pozen told a congressional panel that the Justice Department was "investigating the electronic book industry along with the European Commission and with states' attorneys generals".