Friday, December 14, 2012

European Authorities Accept eBook Pricing Settlement; Penguin Now In Talks

Publishers Lunch

As expected, the three US Settlers (Harper, Hachette and Simon & Schuster), along with Macmillan and Apple, have settled the EU investigation into ebook pricing as previously negotiated. The European Commission has formally "accepted the legally binding commitments" from the settling parties.
Their announcement provides a lengthy way of saying that the EC has accepted the same basic settlement that was laboriously negotiated with the US Department of Justice (without ever actually mentioning the US case).
Though Penguin has not settled with the EC, the new announcement says that position may change--not a big surprise, since settlements in both Europe and the US are considered by outsiders to be a necessary prerequisite as part of the review of the proposed Penguin Random House merger. "Penguin first chose not to offer commitments. However, the Commission is currently engaged in constructive discussions with Penguin on possible commitments. If these discussions bear fruit, they would allow an early closure of proceedings also against that publisher." In the meantime, as part of Apple's "commitments," they will terminate their existing ebook sales agreement with Penguin, to be replaced by a new contract with no most favored nations clause on pricing.
As we have pointed out before, one of the most important aspects of the European settlement is repeated at the very end of their announcement: "It is also worth mentioning that this decision does not relate to national retail price maintenance laws." So in countries such as Germany and France, two of the three largest ebook markets in Europe, the settlement has little or no effect, since discounting of books and ebooks is not allowed anyway.
In the US, the Department of Justice was quite clear in declaring its view that agency pricing by itself is legal; it was the alleged collusion in moving to that model to which DOJ objected.
But the EC is a little vaguer on the larger issue: "The Commission does not take issue with the use of agency agreements as such or the use of a specific business model, if the relevant agreements and business practices comply with EU law." The latter phrase is the key, and "the decision does not take a position on the compatibility of the parties' agency agreements with EU antitrust rules as such." Instead, they suggest the legality of agency depends on the particular circumstances. "The compliance of any new agency agreement, generally speaking, with Article 101 TFEU is likely to require a case-by-case assessment."

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