EU antitrust bigwig offers Apple, publishers ebook truce
But only if sacrifices are made
The EU is willing to consider settling its differences with ebook publishers and Apple if they're willing to make some sacrifices, the European Commission's antitrust chief said.
The commission is in the midst of an investigation into whether Apple colluded with five major publishing houses to fix prices for digital books in an attempt to rescue the book sector and sock it to Amazon - at the expense of customers.
European Commissioner for Competition Joaquin Almunia told Reuters and others that the "possibility of a settlement is only open" if publishers are ready to address "all our objections".
The investigation is important to regulators “because the ebooks market is growing very fast and we have an interest to avoid collusive practices”, Almunia added, according to Bloomberg.
Almunia said that EU regulators were coordinating with US counterparts on probing the pricing deals between Apple and publishers, which shifted the book market from a wholesale to an agency pricing model. If the companies can't settle with the commission and avoid admitting any wrongdoing, they face a fine of up to ten per cent of their global sales.
The publishers in the soup with Apple are Harper Collins, Hachette Livre, Simon & Schuster, Penguin and Macmillan. ®
Not that simple
@James O-Brien: "Why is it that Apple and the book publishers are being offered a free pass here?"
For a start, there hasn't been an investigation or verdict in this matter. Microsoft and Intel were first found guilty and then punished accordingly. The EU and US anti-trust bodies are voicing concerns that this behaviour *might* damage the market, but not that it *has*. If the concerns are addressed, the market is protected.
Secondly, this market has already been subjected to questionable behaviour by Amazon. It seems people have short memories - with at least 90% of the eBook market, Amazon first tried to strangle the existing (paper-based) book market and then to hold the remainder with an iron fist, e.g. http://www.nzherald.co.nz/technology/news/article.cfm?c_id=5&objectid=10791546
Amazon tried to strong-arm publishers into exclusive agreements when Apple first made moves to enter the industry. Anti-trust action would certainly have followed if arrangements between Apple and publishers had been blocked by Amazon. Stating "you can't sell through anyone but us" is far more damaging than stipulating "you can't offer competitors a lower price than you offered us". This is still a (relatively) young market. Now that we have more than one strong player, I think the anti-trust measures are enough to ensure an even playing field.
@Chet Mannly:: "Exclusive deals are perfectly legal. Virtually every book deal is an author releasing their work exclusively through a single publisher."
The exclusivity examples you provided are not equivalent to what Amazon was trying to do. These deals concern individual works, where typically the publisher is investing heavily in promotions. Amazon wanted exclusive rights to *all* e-books provided by *all* the major publishers. In other words, there would be almost no market outside of Amazon. That's very serious in my opinion, especially when you couple it with the fact that Amazon was causing real harm to all other book sellers by selling at a loss (in the way that MS planned to suffocate Netscape by giving away IE). This is temporarily good for customers, but a disaster long-term. Do you think the article I linked to is a fabrication, or doesn't recount a genuine problem?
@Chet Mannly: "Demanding control over the prices charged/paid by competitors (as Apple is alleged to have done here) is the textbook definition of anti-competitive."
Apple has never had (or requested) control over pricing - the agreement with publishers allowed them to set whatever price they wanted. But if the publishers subsequently agreed to a lower price elsewhere, Apple wanted to be offered the same price. How do you see that causing harm to customers or the market?
All Apple have to do is drop the "you can't sell cheaper to any competitor" clause - the indirect control over competitor's pricing is the anti-competitive issue here...
Higher prices not necessarily more profitable
Where sales are price-sensitive, simply raising prices does not insure greater profit. I wouldn't be surprised if all parties actually were to see massively greater sales figures if e-book prices were sharply reduced — seeing as it virtually costs no more to distribute a million e-books than to sell a single copy. I know I would immediately buy hundreds of them, were they offered for a dollar a piece. At current prices though, and seeing as how e-books cannot be resold or even given away, I haven't bought any, and probably never will.
Re: re: Why is it
The wholesale of books is like paying for a bunch of licences, buy 10000 for a fiver each. Sell em for whatever you want. But don't sell more than 10000. No different to selling physical stock.
Publisher gets his cash and Amazon carry the risk if the book flops.
The agency model is the publisher saying sell the books for what we say or you can't sell em. If they supply them in lots of 1 or 1000 or 10000 it makes no odds. The publisher is forcing everyone to sell their books at a price they decide.
If the seller and the publisher get together and split the final selling price to the consumer they then have a vested interest in keeping the price high.
Hope this helps.