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Apple, other e-book publishers offer to change pricing models

September 20, 2012|Bloomberg News

Apple Inc. and four publishers offered to overhaul pricing models for digital books to allay European Union concerns that they blocked competition.

The publishers won't limit retailers' discounts for two years under details of proposals by Apple, CBS Corp.'s Simon & Schuster, News Corp.'s HarperCollins, Verlagsgruppe Georg von Holtzbrinck's Macmillan unit and Lagardere's Hachette Livre published Wednesday in the EU's Official Journal. The European Commission said they first made an offer to settle its investigation in April.

Facing EU pressure, Apple has promised to terminate so-called agency agreements with the four companies and Pearson, it said in its proposal. Under Apple's pricing strategy, the iPad maker takes a fixed percentage of e-book prices set by the publishers.

"The commission took the preliminary view that, by jointly switching the sale of e-books from a wholesale model to an agency model with the same key terms on a global basis, the four publishers and Apple engaged in a concerted practice with the object of raising retail prices" and preventing the emergence of lower prices for e-books, the Brussels-based agency said.

The EU is asking rivals and customers to comment on the offer by Oct. 19 before accepting it, which would end the EU's investigation without imposing fines or determining that the companies violated competition rules.

Regulators continue to probe Pearson's Penguin, which hasn't offered to settle, the EU said in a separate statement. The antitrust agency last year opened the probe to examine Apple's deals with publishers and the publishers' deals with retailers.

While the Holtzbrinck group has denied all charges of collusion over e-books, it believes "it is in the best interests of our European business to proceed towards a settlement," said Joyce Lorigan, a spokeswoman.

HarperCollins said it was "working with the EU to find a solution," spokeswoman Siobhan Kenny said.

Hachette Livre is "convinced that it didn't violate competition law at any time,'" the company said. It said it was offering to settle with the EU to avoid a contentious, costly and long process.

Apple and Simon & Schuster didn't immediately comment.

Under the proposed settlement, the four publishers won't limit e-book retailers' discounts or promotions for two years as long as the total value of a retailer's discount doesn't exceed the commission it received from the publisher over a 12-month period. The four publishers also commit to terminate any restrictive agency deals with retailers.

Apple said in its proposal that its entry into the e-book market "brought needed competition to a market occupied by a single reseller" and it "strongly contests" that it violated competition rules. It said it was modifying agency agreements "to resolve the uncertainty caused by the commission's investigation."

The U.S. Department of Justice sued Apple, Macmillan and Penguin in New York this year, alleging the publishers colluded to fix e-book prices. Simon & Schuster, Hachette and HarperCollins reached settlements with the DOJ.

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