The European Commission announced on September 19, 2012 that the publishers Hachette Livre, HarperCollins, Macmillan and Simon & Schuster (the Four Publishers), and the retailer Apple violated European law (Pearson is under investigation). The Four publishers and Apple were using an agency model to sell ebooks, “engaging in a concerted practice with the object of raising retail prices of ebooks”, or precluding ebook discounts.

The EC argues that the Four Publishers and Apple are violating Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article 53 of the European Economic Area (EEA) Agreement. Article 101 of TFEU prohibits any cartels/agreements that inhibit free competition in the European Economic Area. Article 53 of the EEA Agreement prohibits “concerted practices which may affect trade between Contracting Parties” and prohibits “the prevention, restriction, or distortion of completion.” Article 53 of the EEA also says that an individual/company cannot directly or indirectly fix purchase or selling prices.

The agency model allows the publishers, instead of retailers, to decide how much the public pays for a product and the retailer receives a percentage of that price. A retailer has the choice as to whether or not the retailer wants to enter into an agency agreement with a publisher; retailers who don’t enter into an agency agreement set the price of the product themselves.

The EC and the Four Publishers and Apple have made agreements to address the EC’s “competition concerns”. The effects of the agreements are the ending of the agency agreement between the Four Publishers and Apple and that retailers of ebooks will be able to lower the prices of the ebooks that they sell, if they like, for at least two years. In response to the new agreements, in the UK, ebook prices are expected to fall.

The Four Publishers and Apple do not think that they have violated any laws or competition regulations, but they consented to the agreements to ease the competition concerns of the EC. The agreements are “a major victory for Amazon and its philosophy of low prices”, Phillip Jones, editor of The Bookseller, said to The Guardian. “It looks to me that we’ll see renewed discounting on the big ebooks from the major publishers … with minimal restraints on what the big e-bookseller can do with price. Good news for ebook readers in search of a bargain, not great news for publishers, and pretty worrying news for high street bookshops.”

According to The Guardian, Hachette Livre believes that its choice to enter into agency agreements was the best decisions for the book industry as a whole. But, Hachette Livre decided that a legal proceeding against the European Commission would be too “disruptive” to its business. Their main commitment is to their authors and readers and Hachette Livre believes that following the agreements of the EC was the best way to maintain a productive business.


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