Apple, publishers back off in EU e-book antitrust case

BRUSSELS Wed Sep 19, 2012 8:20pm IST

Apple Inc. CEO Tim Cook takes the stage during Apple Inc.'s iPhone media event in San Francisco, California September 12, 2012. REUTERS/Beck Diefenbach

Apple Inc. CEO Tim Cook takes the stage during Apple Inc.'s iPhone media event in San Francisco, California September 12, 2012.

Credit: Reuters/Beck Diefenbach

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BRUSSELS (Reuters) - Apple Inc and four major publishers have offered to let retailers such as Amazon.Com Inc sell e-books at a discount to settle an EU antitrust investigation into their pricing deals and avoid possible fines.

The case highlights the battle between retailers and publishers over pricing control as publishers look to e-books to boost revenues, cut costs and reach bigger audiences.

EU regulators have been investigating Apple's e-book pricing deals with Simon & Schuster, News Corp unit HarperCollins, French group Lagardere SCA's Hachette Livre, Verlagsgruppe Georg von Holtzbrinck, which owns Macmillan in Germany, and Pearson Plc's Penguin group.

Apple and the publishers, with the exception of Penguin, have offered to settle with the European Commission, which began its inquiry last December. The EU watchdog detailed the offer on Wednesday, confirming a Reuters report on August 31.

"For a period of two years, the four publishers will not restrict, limit or impede e-book retailers' ability to set, alter or reduce retail prices for e-books and/or to offer discounts or promotions," the Commission said in its Official Journal.

It said the publishers and Apple also proposed to suspend "most-favored nation" contracts for five years. The clauses barred publishers from making deals with rival retailers to sell e-books at prices lower than those set by Apple.

The EU watchdog said third parties have a month to provide feedback on the proposals. If the response is positive, the Commission will end its investigation without an infringement finding.

Amazon, which makes the Kindle e-reader and had long sold e-books for as little as $9.99, declined to comment.

If the offer were to be accepted, it would mean the publishers getting off relatively lightly, said Mario Todino, a partner at Brussels-based law firm Gianni, Origoni, Grippo, Cappelli & Partners.

"The commitments are quite extensive and will more or less address the issues. However, the absence of a fine shows the Commission being quite lenient, as the alleged infringements could be considered hard-core," Todino said.

"The lenient stand could be the Commission taking into account two elements, the relatively new e-book distribution model and the market power of a major retailer," he said.

HarperCollins, Simon & Schuster and Hachette reached a settlement with the U.S. government in April with similar proposals.

Joseph Wayland, the U.S. Justice Department's acting antitrust chief, said that the department was in touch with Apple and the book publishers as part of litigation but declined to say if settlement talks were underway.

Asked about the settlement offer made to Europe, Wayland said, "What that means for us, I don't know."

Publishers switched to the agency model with Apple in 2010, under which they set the price of e-books and Apple took a 30 percent cut. The wholesale model favored by Amazon and other sellers gave retailers pricing power.

According to analysts at UBS, e-books account for about 30 percent of the U.S. book market and 20 percent of sales in Britain, but are still negligible elsewhere.

The Commission said it was continuing its investigation into Penguin. The company is also fighting the U.S. regulators.

(Additional reporting by Diane Bartz in Washington; editing by Rex Merrifield and David Cowell)

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