Settlement in the EU e-book investigation

On 13 December 2012, the European Commission formally accepted the commitments offered by Apple and several publishers, putting an end to its investigation into e-book pricing. These companies’ behaviour on the market for e-books was indeed under review in both the EU and the US (for background information see here).

The Commission expressed concerns that, by switching the sale of e-books from a wholesale model to an agency model, the four publishers (Harper Collins, Holtzbrinck/Macmillan, Simon & Schuster and Hachette) and Apple engaged into collusive behaviour leading to higher retail prices of e-books in the EEA. Each of the agency agreements signed between Apple and the publishers contained the same key terms, including retail pricing restrictions and a  most favoured nation (“MFN”) clause. The latter required the publishers to set e-book prices on the iBookstore at or below the lowest price on the market, guaranteeing that Apple always had the lowest prices.

In a statement of the same day, Joaquin Almunia explained that Apple and the publishers had colluded to influence e-book pricing allowing them to face the threat coming from online retailer Amazon. The Commission was indeed concerned with the limitation of retail price competition flowing from these agreements and with the ability of the publishers to apply pressure on retailers, threatening them to stop supplying e-books if they offered lower prices or did not agree to the switch to agency agreements (allowing the publishers to control retail prices).

Although they did not agree with the Commission’s preliminary assessment, Apple and the four publishers committed to terminate the current agency agreements as well as to allow retailers to set their own prices or to offer discounts for e-books for a two-year period. The companies also undertook to refrain from concluding agreements containing MFN clauses for a period of five years. 

Despite its similarity to the commitments offered in Europe, the US settlement agreement was rejected by Holtzbrinck/Macmillan and Apple. Litigation against Apple, Holtzbrinck/Macmillan and Penguin is still on-going in the US. It has been argued that such a different outcome may be due to the differences in the litigation process between the US and the EU. This case reflects how different procedural rules in two jurisdictions may influence the conclusions reached by companies as to whether they should settle a case before the antitrust authorities. The EU antitrust probe also targeted Penguin but the publisher originally chose not to settle. Joaquin Almunia revealed that the company had come to the Commission willing to engage into discussions regarding similar commitments.