European Commission market tests commitments in the e-books market

On 19 September 2012, the European Commission invited interested parties to comment on the commitments offered by four international publishers – Simon & Schuster (CBS Corp., USA), Harper Collins (News Corp., USA), Hachette Livre (Lagardère Publishing, France), Verlagsgruppe Georg von Holtzbrinck (owner of inter alia Macmillan, Germany) – and Apple, following the Commission’s investigation into the e-book market in the European Economic Area (“EEA”), under Article 101 of the Treaty on the Functioning of the European Union (“TFEU”). The Commission carried out inspections at the premises of the companies concerned in early 2011 and opened formal proceedings in December 2011 (see Newsletter 1/2012 p. 5 for more background).

The Commission investigation’s focused on agency agreements concluded by the four publishers and Apple for the sale of e-books in the EEA. The publishers adopted agency agreements containing the same key terms, in particular an unusual so-called Most Favored Nation (“MFN”) clause, which allows more control by publishers over retail prices. The Commission was concerned that the switch from a typical wholesale model to such agency model may have been the result of collusion between competing publishers helped by Apple, and may have been aimed at raising retail prices of e-books in the EEA or preventing the emergence of lower prices.

In essence, in the proposed commitments, the five companies would offer to terminate the existing agency agreements and refrain from adopting price MFN clauses for five years. In case any of the four publishers would enter into new agency agreements, retailers would be free to set the retail price of e-books during a two-year period, provided the aggregate value of price discounts granted by retailers did not exceed the total annual amount of the commissions that the retailer received from the publisher. If the market test confirms that the commitments address the Commission’s competition concerns, the Commission may make them legally binding on the companies. [Gabriele Accardo]