Amazon wins EU e-book pricing battle against Apple

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The European Commission closed an antitrust inquiry into e-book prices yesterday (13 December) after Apple and four international publishers agreed to ease pricing restrictions on Amazon and other retailers.

The decision hands online retailer Amazon a victory in its attempt to sell e-books cheaper than rivals in a fast-growing market publishers hope will boost revenue and customer numbers.

The EU executive said that the concessions from Apple, USA publishers Simon & Schuster and Harper, France’s Hachette Livre, and Germany’s Verlagsgruppe Georg von Holtzbrinck soothed concerns that their pricing deals curbed competition.

"The commitments proposed by Apple and the four publishers will restore normal competitive conditions in this new and fast-moving market, to the benefit of the buyers and readers of e-books," EU Competition Commissioner Joaquín Almunia told a press conference.

Apple and the publishers offered to let retailers set prices or discounts for a period of two years, and also to suspend "most-favored nation" contracts for five years.

Such clauses bar publishers from making deals with rival retailers to sell e-books more cheaply than Apple.

Failure to comply could cost companies

The agreements, which critics say prevent Amazon and other retailers from undercutting Apple's charges, led to the EU antitrust investigation in December last year.

Pearson Plc's Penguin group, which is also under investigation, was not part of Thursday's settlement. The Commission said Penguin had offered concessions expected to resolve the matter with the competition authorities.

Companies found guilty of infringing EU rules can be fined up to 10% of their global sales, which in Apple's case could reach $15.6 billion, based on its 2012 fiscal year.

UBS analysts estimate e-books account for about 30% of the US book market and 20% of sales in Britain, but are minuscule elsewhere. Amazon charged $9.99 per book when it launched its Kindle e-reader.

Apple's agency model let publishers set prices in return for a 30% cut to the maker of iPhone and iPad.

According to Albert Greco, a professor at Fordham University, Amazon's share of the US e-book market reaches 65% of the public there, ahead of publisher Barnes & Noble's 27% share.

HarperCollins, Simon & Schuster and Hachette have settled with the US Department of Justice in a similar investigation but Apple, Penguin Group and Macmillan have not.

In March 2011, the Commission carried out unannounced inspections at the premises of several companies active in the e-book publishing sector in several member states (>> Read Commission memo).

The Commission and the UK Office of Fair Trading investigated in parallel and in close cooperation whether arrangements for the sale of e-books may breach competition rules.

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