Apple and five major book publishers are under investigation by the European Commission (EC) amid allegations they have been colluding to fix the price of e-books.
Penguin , Harper Collins, Hachette Livre, Simon & Schuster and Holzbrink, the German parent of Macmillan, may have been engaging in illegal and anti-competitive practices designed to block potential competitors, the EC said as it opened the investigation yesterday.
All five publishers have signed up to the so-called “agency model” of pricing, whereby publishers are allowed to dictate the price consumers pay for an e-book, as long as they hand over 30pc of their revenues to the retailer.
They adopted the model last year when Apple launched the iPad a move that was widely seen as an attempt to loosen Amazon’s grip on the burgeoning ebook market.
Before that, publishers sold e-books wholesale to retailers in the same way as they sold printed books, recommending a retail price but leaving booksellers to make the ultimate decision, ensuring competition and driving down prices.
Many e-book retailers including Amazon, which has about 70% of the e-book market chose to sacrifice margin as they battled for market share, significantly lowering customer expectations of what they should pay for a book and sparking concerns about the future profitability of the publishing industry.
The EC said on Monday it will investigate whether the five publishers and Apple have “engaged in illegal agreements or practices that would have the object or the effect of restricting competition”, as well as examine their agency agreements’ “character and terms”.
The investigation follows raids by European authorities on several major unnamed publishers in March, because its agents had “reason to believe” that several companies across Europe” may have violated EU anti-trust rules that prohibit cartels and other restrictive business practices”.
The Office of Fair Trading in the UK has also been investigating Penguin and Harper Collins over the agency pricing model, but will close its inquiry and hand over to the EC instead.
A spokesman for Penguin’s parent company, Pearson , said it did not believe it had breached any laws but that it would “fully and openly co-operate” with the EC investigation.
Harper Collins and Simon & Schuster also said they were co-operating with the investigation. Apple and Hachette Livre declined to comment.
Douwe Groenevelt, a lawyer at Brussels law firm De Brauw Blackstone Westbroek, said the move could pave the way for more EC scrutiny of the pricing of other digital media, such as films and music. “We can expect the EC to investigate other distribution models in the digital sector,” he said.