updated 07:30 am EST, Tue December 6, 2011
EC worries iBookstore may have made illegal deals
The European Commission detailed plans Tuesday for a formal investigation into major publishers and Apple as to whether their deal might violate EU antitrust law. Officials will determine whether Hachette Livre, HarperCollins, Penguin, Simon & Schuster, and Macmillan have possibly used Apple to shut out e-book competition from rival stores or publishers. EC staff are worried that the agency model, where the store makes a flat rate and the publishers set the prices, is keeping the price of titles on the iBookstore and elsewhere artificially high.
"The Commission has concerns that these practices may breach EU antitrust rules that prohibit cartels and restrictive business practices," it said.
Officials had already raided publishers' offices in March. The UK's Office of Fair Trading has also been investigating publishers in Britain in what's now known to be "close cooperation" with the EC.
Apple's suspected involvement wasn't detailed, but may have much to do with a war with Amazon to court publishers. Until the iBookstore, Amazon had adopted the wholesale model for the Kindle, where publishers got a fixed amount for e-books and Amazon could charge what it wanted. While it led to lower prices, publishers were known to be unhappy since Amazon was often price dumping, selling at or even below cost to build market share.
In using the agency model, Apple gave publishers the higher prices that they had wanted. By asking for a "most favored nation" condition where prices couldn't be lower at any other store, though, it pushed Amazon into using the agency model itself to keep publishers, increasing the price of books in its own store.
Neither Apple nor the publishers have responded to the investigation so far.