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E-Books Pricing: The EU Antitrust Chapter Is About To Close

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The EU E-books antitrust probe is quasi-closed: the EU Commission announced yesterday that it accepted and made legally binding the commitments offered by Apple and four publishers to settle the investigation that was opened in December last year.

The Commission was investigating whether the publishers may have colluded, with Apple’s facilitation, to jointly switch from a wholesale model to an agency model with the same key terms for the distribution of e-books. These terms consisted in particular in an “unusual” retail price MFN clause, maximum retail price grids and a similar 30% commission to Apple.  The Commission had taken the preliminary view that the object of this concerted practice was to raise retail prices of e-books in the EEA or to prevent the emergence of lower prices in the EEA for e-books.

The EU settlement requires the publishers to terminate all agency agreements that include retail price restrictions, such as MFN clauses, and to not include such clauses in their new (and renegotiated) deals for a five-year period.  They also committed to a two-year “cooling off” period during which retailers will be free to give discounts on e-books equal to up to one year’s commissions (received from the publisher).  Similarly, Apple is to terminate its agency agreements with all of the publishers and refrain from enforcing or entering into retail price MFN mechanisms.

The retail MFN clauses were a clear focus of the Commission in this investigation.  It took the view that these clauses were intended to facilitate publishers switching retailers to the agency model on terms similar to those signed with Apple.  However, since there is not finding that such a provision breached competition law (since the commitments were adopted through the Article 9 process), it is not clear what this result might mean for other sectors (particularly online) where MFN clauses are also used.  In this context, it is worth noting that issues of agency and the effect of MFN clauses are under consideration in the hotel booking investigations (currently open in Germany, the UK and Switzerland).

Finally, we note that the EU probe continues with respect to the publisher under investigation that initially decided not to settle (Penguin).  The Commission has indicated that it is engaged in “constructive discussions” with this publisher to achieve an early closure of this element of the investigation.

On the other side of the Atlantic, two publishers and Apple continue opposing the DoJ’s allegation before the Southern District of New York Federal Court (the DoJ settled with three other publishers and the settlement was approved by the court on 6 September 2012).

We previously reported on this issue in October 2012.