EU Favors Amazon Over Apple in eBook Battle
November 6, 2012

European Union To Find In Amazon’s Favor Over eBook Battle

Michael Harper for — Your Universe Online

In an exclusive report, Reuters is claiming the antitrust investigation into Apple for their alleged attempts to fix the prices of eBooks in Europe is coming to a close, with Amazon emerging victorious.

The European Union regulators are said to be ready to accept a deal from Apple and four publishers that would lessen the price restrictions on Amazon, according to 2 sources who spoke with Reuters. With this decision in place, Amazon will be able to once again sell their eBooks at a lower price than Apple and other rivals.

Apple and four other publishers, Simon & Schuster, HarperCollins, Hachette Livre and Macmillan, offered a deal in September that would allow retailers to set their own prices and offer their own discounts on eBooks for 2 years. Furthermore, this deal suspends “most-favored nation” contracts for 5 years, a clause which enables a seller to give all buyers the best terms.

The European Union (as well as the American Department of Justice) launched investigations into these deals when critics began to complain that the measures prevented Amazon from selling books at their own price.

The Penguin Group is also under investigation, though they did not take part in the offer. The EU Antitrust authority accepted the deal from Apple and the publishers in September and now, according to 2 sources familiar with the matter, the deal will be accepted soon.

“The Commission is likely to accept the offer and announce its decision next month,” said one of the unnamed sources, speaking to Reuters.

A spokesperson for competition policy at the European Commission told Reuters, “We have launched a market test in September and our investigation is still ongoing.”

At the heart of this deal is Apple´s agency pricing model. Before Apple got into the eBook business, publishers would sell their books to retailers and wholesalers, such as Amazon, at one price. These resellers could then sell the book at whatever price they wanted using discounts or wholesale pricing. With Apple´s agency pricing, the publishers set the price and give the reseller 30% of the cut. Apple uses the same model in their App Store, with developers naming their own price and Apple taking 30% off the top. The part that makes this agency pricing so troublesome, however, is the clause saying publishers cannot sell their books to another reseller at a lower price. Therefore, if a publisher offers a book to Apple at one price, they cannot offer it at a lower price to Amazon, effectively preventing Amazon from beating Apple on price.

This case in Europe closely resembles the DOJ investigation currently underway in America. While Hachette, HarperCollins and Simon & Schuster immediately agreed to settle in the American case, Apple and Macmillan plan to take the case all the way to the courts. Penguin is being investigated in both instances, refusing to settle on either continent.

As a part of the American probe, some customers of Amazon and Apple received emails last month informing them they´d be receiving credits in their account as reimbursement for paying too much for their eBooks.

Three of the publishers, Hachette Book Group, HarperCollins and Simon & Schuster, suggested a settlement wherein they would pay those customers who may have over paid for their books as well as prevent their ability to set their own prices in the future. Amazon and Apple eBook customers may have a while to wait for these credits to appear in their accounts, however, as the judge won´t decide on this case until February.