In a move that could mean victory for Amazon, next month European Union regulators are expected to accept an offer from Apple that would allow retailers that compete with Apple’s iBookstore to sell ebooks at lower prices, ending an antitrust probe into ebook pricing in Europe.
Apple is promising to ease price restrictions on publishers selling books on Amazon, two sources told Reuters.
“It’s certainly another win for Amazon. I have not seen the terms of the final settlement, but my initial reaction is that it places restrictions on what publishers can do, slowing them down just when they need to be more nimble,” ebook publisher Smashwords founder Mark Coker told Reuters.
In the US Apple is still fighting the Department of Justice over claims that it colluded with publishers to fix ebook prices, however in Europe Apple agreed to settle the case back in April and offered to overhaul its pricing model for ebooks. A settlement was proposed in September in which Apple promised to terminate so-called agency agreements with publishers. In addition, they will allow retailers to set their own prices on titles for two years.
Apple’s proposal means ditching the “Most favoured nation” clause from its contracts with publishers. The clause prevented publishers from selling books to other retailers at prices lower than those offered to Apple. The clause was intended to prevent Amazon from striking deals to continue undercutting other retailers.
Price fixing settlement could be “bad news for Europe”
The European Union antitrust regulators began its investigation of Apple and various publishers back in December 2011. According to the European Commission (press release here) the investigation would examine whether the publishers were: “With the help of Apple, engaged in anti-competitive practices affecting the sale of ebooks in the European Economic Area, in breach of EU antitrust rules.”
Over in the US, in a similar case, the DOJ is claiming that Apple and a number of book publishers have conspired to fix ebook prices and therefore caused “unmistakable consumer harm”. However, rather than accept the charge as it has in Europe, Apple claims that the Department of Justice has sided with a monopoly (Amazon) rather than competition. Apple, along with a handful of publishers, has refused to settle.
The Reuters report notes that in the US some publishers have settled. This settlement required that retailers must at least break even selling all ebooks from a publisher’s available list. This could mean that a reseller could sell popular books at a loss as long as they sold other books from a publisher at a higher price.
“It was not clear if EU regulators will include a similar requirement, which would prohibit Amazon from pricing all ebooks at a loss”, O’Reilly Media publisher Joe Wikert told Reuters.
Coker told Reuters that such a rule could be dangerous in Europe: “It could allow a single retailer to charge full price in a large market like the UK, and then sell below cost or for free in multiple smaller markets as a strategy to kill regional ebook retailing upstarts before they take root,” he said.