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Agency model may violate anti-cartel laws in Europe

European investigators have asked publishers for ebook sales records.

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Random House’s switch to the agency model for its ebook pricing structure last week delighted the American Booksellers Association and landed Random House in Apple’s iBookstore, but not everyone is pleased with the agency model Apple requires. In a comment for a story in the LA Times, Dennis Morin, partner at BeamItDown Software, said:

The economic damage that Apple has wreaked on small ebooksellers is enormous. It is all pocket change for Apple, but life and death for many. There is something fundamentally wrong when companies can wield such power.

(Indeed, John Naughton argued at the Guardian’s TheObserver, that Apple has ousted Google as the reigning evil enterprise.)

Agency pricing may not only be damaging to the little guy and helping to fund Apple’s evil empire — it may be illegal. Investigators in the UK are looking into the ebook agency pricing that most major publishers have adopted, in part, to put ebooks on Apple’s iBookstore shelves, as a possible cartel. Benedicte Page and Leigh Phillips reported in a Friday post at the Guardian that European Commission investigators raided several publishing houses earlier that morning:

Investigation teams have asked many of the biggest London publishing houses, including HarperCollins, Hachette and Penguin, for all records and documents relating to ebook sales.

The [Office of Fair Trading] said the investigation was “at an early stage”, stressing: “It should not be assumed that the parties involved have breached competition law.” It is thought the investigation could last a year.

A spokeswoman for the investigation team commented in the story that if investigators find publishers guilty of price fixing, the penalties will have lasting, far-reaching effects:

We have suspicions of collusion to keep prices high. But if our suspicions prove to be founded, this would have an impact across the EU because ebooks are sold across borders.

Such findings may also have potential to affect industry policies — and profit margins — worldwide.

Ronald Blunden, head of communications at Hachette, argued in the story that agency pricing is not a cartel, but rather a way to prevent retailers like Amazon from driving down the cost — and perceived worth — of ebooks:

It’s important for the publisher to control the retail price. We don’t want the items sold below cost, as the perceived value of books becomes damaged. Once this happens, can we expect online retailers to absorb the cost of financing the editing and publishing of books?

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  • http://www.eAnagnostis.gr Michalis Kalamaras

    To my understanding, the European Commission is not implying that agency model is violating anti-cartel laws in the EU. There is a violation if there are (proven) agreements between publishers to fix prices (Article 101 of the Treaty), which is different from agency model, where its publisher sets the prices for its e-books.

    Hachette and other publishers from France believe though that the complaints filed against them for price fixing have to do with Amazon fighting against the agency model. Thus, according to them, agency model is the real reason for complaints, though it isn’t what the European Commssion is actually investigating.