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Canadian e-books and e-reader company Kobo and partner Indigo Books & Music have been granted a stay on an agreement between Canada’s competition watchdog and four major publishers which would have seen the costs of e-books fall this spring. Kobo had said the deal would cause it irreparable harm.
The last-minute reprieve was handed down without details this week by the federal Competition Tribunal in Ottawa on the eve of launching the agreement between the bureau and Hachette Book Group, HarperCollins, Macmillan/Holtzbrinck Publishers and Simon Schuster.
The order in Kobo’s favour halted the planned 19th March implementation of a deal which removed restrictions on retailer discounting of e-books.
Kobo, the largest e-book retailer in Canada, had argued the company would “suffer unrecoverable losses” if the deal was allowed.
“Without a stay, Kobo will be irreparably harmed,” Kobo said last week in documents filed with the tribunal. “Its contracts with four of the largest e-book publishers in Canada will be terminated or fundamentally altered. Kobo — not the consenting publishers — will bear the financial losses arising from these changes.”
In a counter argument filed on 13th March, the Competition Bureau said “the only irreparable harm will be to the public interest.”
The four publishers signed the deal in early February following an 18-month investigation by the bureau into conduct preventing or lessening competition for e-books in Canada.
Although the houses denied the alleged collusion, they agreed to drop clauses in distribution agreements prohibiting discounting and setting similar prices between retailers.
The agreement also banned so-called agency agreements, under which Kobo was appointed as a nonexclusive agent for the marketing and delivery of e-books on the publisher’s behalf, for a commission of 30%.
On an affidavit also filed on 13th March, Canadian book retail giant Indigo, Kobo’s former owner and now partner with the e-book company, argued the agreement would reduce Kobo’s ability to operate against Amazon, the second largest e-book retailer in Canada, impairing the sector’s competitiveness in the long-term.
“The removal or diminishment of Kobo as an effective competitor for the supply of e-books in Canada will have a significant and direct effect on Indigo's operations and the broader market for e-books in Canada,” Indigo c.e.o. Heather Reisman stated. “Without access to an effective partner for the sale of e-books in the Canadian market, such as Kobo, it is unlikely that Indigo will be able to effectively compete in this market.”
The parties have until 21st March to submit proposed timetables for a hearing.
Michael Tamblyn, Kobo chief content officer, commented: "We are very pleased that Canada's Competitions tribunal has seen fit to stay the implementation of the Competitions Bureau's consent agreement regarding Agency in Canada until Kobo's application can be heard. We look forward to seeing the tribunal's detailed findings and working towards an expeditious hearing of our case. This represents a solid step forward in ensuring Canadian consumers have a diversity of ebook retailers to choose from when they decide to read digitally."