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Conn. lawman grills Apple and Amazon over e-book pricing

Most favored nation status scrutinized

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Connecticut's top law enforcement official said he is investigating whether agreements Apple and Amazon.com have reached with e-book publishers violate antitrust laws by freezing competitors out of the market.

In letters to the general counsels of Apple and Amazon, Attorney General Richard Blumenthal said he was concerned about guarantees both companies have secured promising them e-book prices that are lower than any other sellers. The so-called MFN, or most favored nation, status doesn't automatically violate antitrust laws, but it could harm consumers, Blumenthal said.

“MFN clauses — especially when they are offered to two of the largest e-book retail competitors in the United States — have the potential to impair horizontal competition by encouraging coordinated pricing and discouraging discounting,” Blumenthal wrote in the letters here and here (both are PDFs), which were sent late last week. “The net effect is fairly obvious, in that MFSs will reduce the publisher's incentive to offer a discount to Apple if it would have to offer the same discount to Amazon, leading to the establishment of a price floor for e-books offered by the publisher.”

A preliminary review by Blumenthal has already found that e-book prices offered by Amazon, Apple, Borders and Barnes & Noble for several titles on The New York Times Bestseller list were identical.

“These agreements among publishers, Amazon and Apple appear to have already resulted in uniform prices for many of the most popular e-books — potentially depriving consumers of competitive prices,” Blumenthal said in a statement. He has requested a meeting with legal representatives of both companies “to discuss the issues I have raised in greater detail.”

Apple and Amazon have secured the guarantees from Macmillan, Simon & Schuster, Hachette, HarperCollins, and Penguin. Blumenthal has long been a thorn in the side of companies accused of privacy and competition tresspasses. In the late 1990s, he vigorously pursued Microsoft for antitrust violations. More recently, he has pursued Google for its Streetview Wi-Fi snooping, Craigslist for prostitution ads, and MySpace for catering to registered sex offenders. ®

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