Apple Inc and four major publishers have offered to let retailers such as Amazon.Com Inc sell e-books at a discount to settle an EU antitrust investigation into their pricing deals and avoid possible fines.
The EU watchdog detailed the offer on Wednesday, confirming a Reuters report on August 31.
"For a period of two years, the four publishers will not restrict, limit or impede e-book retailers' ability to set, alter or reduce retail prices for e-books and/or to offer discounts or promotions," the Commission said in its Official Journal.
It said the publishers and Apple also proposed to suspend "most-favored nation" contracts for five years. The clauses barred publishers from making deals with rival retailers to sell e-books at prices lower than those set by Apple.
The EU watchdog said third parties have a month to provide feedback on the proposals. If the response is positive, the Commission will end its investigation without an infringement finding.
Will there be a fine or restitution for EU consumers? (in the USA, it was a $69 million restitution).
Macmillan and Apple agreed to settle in the EU and the "terms" are very similar to the USA one. Will they settle in the USA also?
Here are the terms of the proposed agreement, which largely mirror those in the ebook settlement in the United States:
Apple, Simon & Schuster, HarperCollins, Hachette and Macmillan will terminate their agency agreements. Penguin, which is not included in the settlement (the EC is “still investigationg [its] conduct”), also has the option to terminate its agency agreement with Apple; if it doesn’t, Apple will “terminate the agreement in line with the conditions laid down therein.”
Other retailers, like Amazon, will also have the option to end their agency agreements with the four publishers; if they don’t, the publishers will end them according to the contract terms.
For two years, the publishers “will not restrict, limit or impede ebook retailers’ ability to set, alter or reduce retail prices for ebooks and/or to offer discounts or promotions.”
There is some protection for ebook prices under agency agreements, however: “The aggregate value of the price discounts or promotions offered by any retailer should not exceed the aggregate amount equal to the total commissions the publisher pays to that retailer over a 12-month period in connection with the sale of its ebooks to consumers.” In the United States, publishers have the right to negotiate such a clause with retailers. In the EU, however, it appears that the clause is a requirement (i.e., a retailer can’t say no).
Apple and the four publishers can’t enter ebook contracts with MFN clauses for five years, and “Apple will inform any publisher with which it has an ebook agency agreement that it will not enforce a retail price MFN clause in any such agreement for a period of five years.”
Since the terms of the EU settlement largely mirror that of the USA settlement, why are Macmillan and Apple fighting the USA settlement and want to go to trial?
The EU has this nice anti-trust law:
"If the investigation were to have found the companies in violation of European antitrust laws, each faced penalties equaling up to 10 percent of revenue from global sales."
A settlement would shield the companies from trial and a potential loss of 10% of global revenue.