Bloomberg News

Apple, Four Publishers Bid to End EU Price-Fixing Probe

September 19, 2012

Apple Inc. (AAPL:US), the world’s biggest technology company, and four publishers offered to overhaul pricing models for digital books to allay European Union concerns that they blocked competition.

The publishers won’t limit retailers’ discounts for two years under details of proposals by Apple, CBS Corp.’s Simon & Schuster, News Corp. (NWSA:US)’s HarperCollins, Verlagsgruppe Georg von Holtzbrinck GmbH’s Macmillan unit and Lagardere SCA (MMB)’s Hachette Livre published today in the EU’s Official Journal. The European Commission said they first made an offer to settle its investigation in April.

Facing EU pressure, Apple has promised to terminate so- called agency agreements with the four companies and Pearson, it said in its proposal. Under Apple’s pricing strategy, the iPad maker takes a fixed percentage of e-book prices set by the publishers.

“The commission took the preliminary view that, by jointly switching the sale of e-books from a wholesale model to an agency model with the same key terms on a global basis, the four publishers and Apple engaged in a concerted practice with the object of raising retail prices” and preventing the emergence of lower prices for e-books, the Brussels-based agency said.

The EU is asking rivals and customers to comment on the offer by Oct. 19 before accepting it, which would end the EU’s investigation without imposing fines or determining that the companies violated competition rules.

Penguin Probe

Regulators continue to probe Pearson Plc (PSON)’s Penguin, which hasn’t offered to settle, the EU said in a separate statement. The antitrust agency last year opened the probe to examine Cupertino, California-based Apple’s deals with publishers and the publishers’ deals with retailers.

While the Holtzbrinck group has denied all charges of collusion over e-books it believes “it is in the best interests of our European business to proceed towards a settlement,” Joyce Lorigan, a spokeswoman, said in an e-mailed statement.

HarperCollins said it was “working with the EU to find a solution,” according to an e-mail from spokeswoman Siobhan Kenny.

Hachette Livre is “convinced that it didn’t violate competition law at any time,’” the company said in a statement on its website. It said it was offering to settle with the EU to avoid a contentious, costly and long process.

Apple and Simon & Schuster didn’t immediately respond to e- mails seeking comment.

Discounts

Under the proposed settlement, the four publishers won’t limit e-book retailers’ discounts or promotions for two years as long as the total value of a retailer’s discount doesn’t exceed the commission it received from the publisher over a 12-month period. The four publishers also commit to terminate any restrictive agency deals with retailers.

Apple said in its proposal that its entry into the e- book market “brought needed competition to a market occupied by a single reseller” and it “strongly contests” that it violated competition rules. It said it was modifying agency agreements “to resolve the uncertainty caused by the commission’s investigation.”

The U.S. Department of Justice sued Apple, Macmillan and Pearson’s Penguin in New York earlier this year, claiming the publishers colluded to fix e-book prices. Simon & Schuster, Hachette and HarperCollins reached settlements with the DOJ.

Music Downloads

PricewaterhouseCoopers said last year that European e-book sales have been sluggish, partly because of the small range of non-English titles and fixed price agreements between publishers and stores in 13 countries. The EU’s antitrust chief Joaquin Almunia has said he wants to fight “artificial restrictions imposed by some companies to cross-border trade.”

Apple previously settled an EU antitrust case in 2009 by agreeing to reduce prices for U.K. iTunes music downloads and was probed over restrictions on iPhone applications in a case the EU closed last year.

To contact the reporter on this story: Aoife White in Brussels at awhite62@bloomberg.net.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.


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