Publishers settle with EC on agency pricing

The European Commission has accepted commitments from Apple, Hachette Livre, HarperCollins, Simon & Schuster and Macmillan and ended its investigation into e-book pricing.

The EC stated it was also currently engaged in "constructive discussions" on a settlement with Pearson.

The four publishers who have now settled, and Apple, have agreed to terminate the current agency agreements, and to allow retailers to set their own prices for e-books and offer discounts and promotions for a period of two years. For a five-year period, neither the four publishers nor Apple will conclude agreements for e-books with retail-price Most Favoured Customer clauses.

Agency agreements with Apple will be terminated within 14 days, and with retailers other than Apple within 70 days.

Joaquin Almunia, vice president of the European Commission responsible for competition policy, said the EC's preliminary conclusion had been that co-ordinated commercial behaviour between the competing publishers with the help of Apple in the switch to the agency model "could possibly constitute an infringement" of competition rules.

Its concerns focused on the joint switch to the agency model on the same key pricing terms in January 2010, he said, and particularly the "most-favoured customer" clause whereby if any retailer sold an e-book at prices lower than that on Apple's iBookstore the publishers would have to match that lower price on Apple's store.

"This clause may seem benign at first sight. But it effectively made it very costly for publishers to allow other retailers to sell at lower prices than Apple since that low price would then have to be extended to Apple's store. This means the incentives of publishers were aligned and they could face Amazon and other retailers as a group," Almunia said. "Our strong suspicion is that this was part of a global strategy to restrict competition at retail level and achieve higher prices."

The EC had "worked closely with the US Department of Justice on this case to seek a global solution", Almunia said. Litigation between the Department of Justice and those parties who have not settled in the US - Apple, Penguin and Macmillan - is still on-going.

Had the publishers not settled, the alternative "would probably have been to impose fines at the end of a long procedure," the Commission added. "However this was not the best solution in the case of a nascent and very fast-moving market . . . This route is the quickest way to bring competition back to this market to the benefit of all consumers who buy e-books in Europe."

The Commission also maintained that there was "no reason" why its investigation "should have any negative impact on cultural diversity or on authors, publishers, distributors and retailers."

In a statement, Hachette Livre said: "Hachette Livre remains confident that it did not violate the antitrust laws, and has made no admission of liability. Hachette Livre considers that its unilateral decision to enter into agency agreements with Apple and other e-retailers was in the best longer-term interests of the whole book universe including authors, readers and booksellers of all kinds.

"However Hachette Livre has decided that the costs, length, and distractions of the proceedings before the European Commission would be too disruptive to its business and to the development of e-book markets in general."

A spokesperson for Hachette UK said: "Hachette UK is engaged in productive discussions with our e-book agents to ensure that our agreements conform to the terms of the settlement. We do not anticipate any disruption to sales of our e-books and are expecting record e-book sales over the Christmas period."

A statement from Holtzbrinck, parent company of Macmillan, said: "From the outset, the Holtzbrinck group has strongly denied all charges of collusion in relation to its ebook businesses. That said, we believe it is in the best interests of our European business to have agreed on these settlement terms and we are pleased now to be able to move forward with developing our ebook publishing business." 

HarperCollins UK said: "Our goal has always been to give consumers the widest choice at the fairest price while simultaneously ensuring that authors receive a fair reward for their endeavour.  We will continue to pursue this goal while complying with today's Commission decision.” 

Penguin UK communications director Rebecca Sinclair said: "Our position has been—and remains—that we have done nothing wrong. As a practical matter, we are settling in the interests of clearing the decks before the new company is established."