Following commitments made by four international publishers and Apple, the European Commission decided on 13 December 2012 to close its investigation into suspected anticompetitive practices in the e-book market.
In December 2011, the European Commission announced the opening of formal proceedings against four international publishers (Hachette Livre (France), Verslagsgruppe Georg von Holzbrinck (Germany), Harper Collins (USA), Simon & Schuster (USA)) and Apple as well as a fifth international publisher Penguin (UK).
The concerns of the Commission focused on the joint switch of the sale of e-books from a wholesale model (where retailers are free to establish their retail prices) to an agency model (where publishers agree to sell at a fixed price to distributors which take a set percentageof the price) containing the same key terms, in particular an unusual “Most Favoured Nation” clause for retail prices.
It should be emphasized that in principle, agency agreements fall outside the scope of EU Antitrust Regulation when the agent does not bear the commercial or financial risk of the commercial operation. Nevertheless, in this case, the Commission suspected that this switch to an agency model was the result of a collusion of publishers and therefore might constitute a cartel as they were, with the help of Apple, in full control of determineing the price of e-books independently which would lead in the end to higher and uniform prices for consumers.
In April 2012, the Commission received offers to settle the investigation from four publishers and Apple. At that time, Penguin was the only company not willing to engage in various commitments to settle the investigation.
In the commitments, the companies proposed to terminate the existing agency agreements and to refrain from adopting price MFN clauses for five years. In the event that any of them enter into a new agency agreement, this would initially be submitted to the European antitrust regulator. In addition, retailers will be free to set the retail price of e-books for two years, provided the aggregate value of price discounts granted by retailers does not exceed the total annual amount of commission that the retailer receives from the publisher.
The Commission has recently accepted these proposed commitments as it considered they were suitable to restore and maintain retail price competition for the sale of e-books in the EU. This decision does not determine whether there was an infringement of the EU antitrust rules but legally binds the companies to respect their commitments. In case of their infringement, the EC can impose a fine of up to 10% of their annual worldwide turnover.
As for Penguin, Commissioner Almunia recently declared that the British publisher seemed ready to offer the same commitments and might, if the discussions succeed, escape fines.
