Apple, Publishers Make Offers to Settle EU Ebook Investigation
August 31, 2012 11:53 AM
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They offered to let Amazon and other retailers to sell ebooks at a discount for two years
An Apple ebook deal may be in the works after a long 10 months of investigation by the European Union (EU).
Apple and four major publishers that are being investigated have started offering antitrust concessions in an effort to ward off fines and further trouble. The four publishers are
Harper Collins (News Corp., U.S.A.),
Simon & Schuster (CBS Corp., U.S.A.),
Hachette Livre (Lagardère Publishing France) and
Verlagsgruppe Georg von Holzbrinck (owner of inter alia Macmillan, Germany).
Penguin (Pearson Group, United Kingdom) is also being investigated, but did not submit a proposal.
One offer from Apple and the four publishers was to allow Amazon and other retailers to sell ebooks at a discount for two years. The Commission is now looking into whether these concessions are enough by taking opinions from the industry.
European Commission opened a formal antitrust investigation
into whether the five international e-book publishers had been practicing anti-competitive tactics with the help of Apple and its e-book store iBooks
. More specifically, the Commission wanted a closer look at the agency pricing model that the publishers adopted with Apple, which allows publishers to set a price for their ebooks and Apple takes a 30 percent cut. However, the publishers can't sell those same books on other retail sites like Amazon for a lower price.
This was not only seen as anticompetitve by the European Commission, but also the U.S. Department of Justice (DOJ).
DOJ sued Apple and the publishers
in April 2012 over the agency pricing model.
Simon & Schuster and
Hachette Livre decided to settle the case with the U.S. DOJ.
Penguin and Macmillan have decided to fight the antitrust case.
The U.S. bench trial in the Apple e-book case will start
June 3, 2012
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RE: How Generous
8/31/2012 1:54:20 PM
Devil's advocate here:
Apple's contract says something like: You pay us 30% and don't sell the same product elsewhere.
Isn't that just an exclusivity contract?
RE: How Generous
8/31/2012 2:28:06 PM
That is a misrepresentation of Apple's most favored nation clause.
Apple says we sell at X price. Apple takes 30% off the top and the publisher gets the rest. The publisher is forbidden from allowing other sellers to
the book for a lower price.
Even when other sellers are willing to take a lower percentage of the sale price.
If Apple sells a book for $10, Apple takes $3 and the publisher gets $7. Amazon was willing to sell the same book for $8, take only $1 and pay the publisher the same $7. The inclusion of the most favored nation clause would have forced the publisher to then sell the same book to Apple for only $5.60 (Apple still taking their 30% and selling the book for the same price as Amazon.)
The end result was not that publishers sold books to Apple cheaper, but that the publishers
resellers to sell the same books at a
price than they previously did.
If you refused to pass on the higher price, you were prevented from selling that publisher's works.
Because each publisher has a defacto monopoly on their books, this appeared to be illegal collusion and price fixing. And that is
illegal in both the E.U. and the U.S.
RE: How Generous
8/31/2012 2:48:17 PM
It's exactly why the publishers should be banding together to sell and distribute their own content. If they don't, someone else will and they will eventually be cut out of the transaction all together. Authors can already dis-intermediate publishers, hire their own editor for cheap and go straight to Amazon. Instead they try to protect their existing business model when it's obsolescence is virtually guaranteed if they stay the course.
RE: How Generous
8/31/2012 11:57:05 PM
There is also the fact that iTunes did not allow publishers to set any price they wanted at launch. I am having trouble finding the articles, but original you could not publish a book on iTunes in $7-14 range. Those tiers were added later.
"Paying an extra $500 for a computer in this environment -- same piece of hardware -- paying $500 more to get a logo on it? I think that's a more challenging proposition for the average person than it used to be." -- Steve Ballmer
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