December 8, 2011

EU investigating possible publisher collusion with Apple


European Union antitrust regulators are investigating Apple Inc. and the e-book business model it uses to sell digital titles from five of the largest international book publishers,” says a Los Angeles Times report by David Sarno. “Officials from the European Commission said Tuesday they were looking into the fairness of e-book sales agreements made by French publisher Hachette Livre, News Corp.-owned Harper Collins, CBS’ Simon & Schuster, Britain-based Pearson Group’s Penguin and the German-owned Macmillan.” Like their American counterparts, each of these publishers had signed on to an agency model deal with Apple in an effort to combat the hegemony of Amazon.

As the report explains:

In 2010 these companies switched en masse to a new pricing system for e-books, called the “agency model,” in which publishers wrested away from retailers the ability to set prices. Before the agency model, e-book sellers such as Inc. sold e-books at any price they liked, much like bricks-and-mortar bookstores. (Once bookstores have purchased books from wholesalers, they can discount or mark up the prices at will.)

In the same way, before the agency model Amazon — then the only major player in e-books sales — was free to set its own prices. The company used that freedom to price its Kindle books at $9.99, a price so low that the company was generally thought to be losing money on most Kindle book sales — in the name of attracting a large group of Kindle book buyers who would be drawn to the low and consistent pricing.

The concern was that Amazon would control the entire market, dictating what the price of ebooks. In an attempt to diversify the marketplace, 5 of the big 6 publishers agreed to work on the agency model with Apple. As the European Union press release puts it, “The Commission will in particular investigate whether these publishing groups and Apple have engaged in illegal agreements or practices that would have the object or the effect of restricting competition in the EU or in the EEA.”

Ironic that in trying to avoid the monopolistic threat of Amazon, the publishers themselves are coming under investigation.


Valerie Merians is the co-founder and co-publisher of Melville House.