Apple probed by EC antitrust arm over ebooks market
Did publishers and Cupertino stifle competition in EU?
Brussels opened a formal investigation into the sales of ebooks in Europe this morning to determine whether five publishers, with the help of Apple, had breached competition rules within the EU.
In a statement, the European Commission listed News Corp-owned, US-based Harper Collins; France-based Hachette Livre, which is owned by Lagardère Publishing; Pearson Group's Penguin in the UK; CBS-owned, US-based Simon & Schuster; and Germany-based Verlagsgruppe Georg von Holzbrinck, which owns, inter alia, Macmillan.
The opening of proceedings means that the Commission will treat the case as a matter of priority. It does not prejudge the outcome of the investigation.
The Commission will in particular investigate whether these publishing groups and Apple have engaged in illegal agreements or practices that would have the object or the effect of restricting competition in the EU or in the EEA [European Economic Area].
The Commission is also examining the character and terms of the agency agreements entered into by the above named five publishers and retailers for the sale of e-books. The Commission has concerns, that these practices may breach EU antitrust rules that prohibit cartels and restrictive business practices (Article 101 of the Treaty on the Functioning of the European Union – TFEU).
Brussels said it was unable to give a deadline for when the investigation would be completed due to a number of factors, including the complexity of each case.
In March this year, the Commission surprised several premises of various companies that do business in the ebook publishing sector, by arriving unannounced to carry out inspections.
The EC said that the UK's Office of Fair Trading (OFT) had been investigating the matter in parallel with Brussels to probe whether business practices for the sale of ebooks breached competition rules.
In a separate statement, the OFT said:
The OFT has decided to close its investigation into whether arrangements that certain publishers have put in place with some retailers for the sale of e-books may breach competition rules.
This decision has been taken on the grounds of the OFT's administrative priorities, in particular because the OFT believes, following discussions with the European Commission, that the European Commission is currently well placed to arrive at a comprehensive resolution of this matter and will do so as a matter of priority.
The OFT will continue to cooperate closely with the European Commission on this matter to help secure the best outcome for UK consumers.
The OFT may reconsider its decision, in consultation with the European Commission, in the future if it has reasonable grounds to suspect that there is an infringement of competition law, which may have an impact on UK consumers.
The OFT has not reached any view as to whether or not the parties involved have infringed competition law.
Apple and the publishers now under investigation by the antitrust wing of Brussels have been told that proceedings are underway, the EC said. ®
Why shouldn't publishers be allowed to set the selling price of their own books?
Because Publishers aren't fixing the price that they want to sell the book for, they are fixing the price that everyone else is allowed to sell at. So if Amazon wants to sell at 20% margin instead of 30% they can't.
I suspect the issue is that Apple wanted to protect its margins so it "arranged" that the publishers don't allow Amazon (as a retailer) to compete on price with Apple. There was competition and now there isn't.
The publisher can always set the wholesale price for books, its retail competition that Apple may have been trying to stifle. Retail in this case is of an undifferentiated product (an ebook is an ebook) with very low distribution costs. For Apple to compete they would be competing head-to-head with Amazon's retail experience.
Apple has itunes, which is a fairly compelling story for apple device owners, Amazon has a much broader product range, economies of scale and can reach any device. Who will buy or use an ipad if the same product is cheaper elsewhere? The last thing apple wants to do is cut margins or have to monitor the competition to see if they are competitive. They want to be a one-stop-shop for content producers and consumers. Being cheap is not what apple does so they need to stop everyone else from being cheap to maintain sales.
There are some things that apple do well and have value - timemachine makes backups easy enough for normal users and having backups adds value to their products. Just inflating selling prices is not adding value, its profiteering. I wish apple would concentrate on doing things better rather than using politics and the legal system or backroom deals to try to squash the competition.
Way to miss the target, Sean Baggaley 1
AFAIK, Amazon was happily selling eBooks (along with several others) as they do real books: i.e. buy the book from the publisher, sell it, with a negotiated wholesale price paid to the publisher, and then Amazon free to set their price (subject to competition).
That's where Apple came along to demand a chunk of the pie. They didn't want anyone selling for less than them, so they and the publishers forced a different model. In effect, it means the publisher is selling the book to the consumer, and gives a cut to the retailer. It amounts to price fixing, and is the reason many Kindle books now say "This price was set by the publisher"
Note: the above is what I understand from the articles I have read. There may be inaccuracies, but I believe the overall story is correct.
Pros and cons.
The "con" is being expected to pay more for an eBook than the hardback version of the same title. An eBook that often has serious formatting problems and is doesn't appear to have been proof read. It seems these publishers think OCRing a book and releasing it as-is is good enough to, not only ask, but demand a premium price.