The European Commission has formally launched their official investigation against Apple and various book publishers. Hachette Livre , Harper Collins, Simon & Schuster, Penguinand Verlagsgrupp are accused of price fixing ebooks via a cartel, which is illegal in Europe.
The European Commission starting today is investigating the fact that Apple and its iBookstore formed a shady collusion with major publishers to undermine Amazon and its undercutting of the market. The Commission has concerns, that these practices may breach EU antitrust rules that prohibit cartels and restrictive business practices (Article 101 of the Treaty on the Functioning of the European Union – TFEU). Article 101 of the TFEU prohibits agreements and concerted practices which may affect trade and prevent or restrict competition. The implementation of this provision is defined in the Antitrust Regulation (Council Regulation No 1/2003) which can be applied by the Commission and by the national competition authorities of EU Member States.
The agency model originated in Europe and eliminates bookstores from setting their own prices. Publishers determine the average list price of books and online ebook stores cannot sell the books for less then that. On average digital retailers are then paid a commission, of around 30% on all books sold.
Amazon directly opposes the price fixing ‘Agency Model’ while Apple made closed door agreements with publishers when it launched their own online digital bookstore. Random House U.S. this year adopted the model for its e-books, thereby gaining entry to Apple’s iBookstore right before the launch of the iPad 2. While in the UK, Random House still uses the wholesale model for e-books and is not included in the European Commission’s investigation.
We reported earlier in this year in March that the EU conducted raids on various book publishers and this investigation marks headway on internal paperwork seized to gather a strong case against book publishers. Many industry experts view the Agency Model with some trepidation because its anti-competitive and allows the companies too much control over a fledgling industry.