Following a federal judge’s decision to approve settlements with three publishers and the Federal Communications Commission in the United States, the Apple/Amazon eBook price-fixing case is taking a different turn in the European Union with officials prepared to market test settlements put forward by Apple and the majority of publishers involved. In the EU, Apple appears to be proposing a settlement similar to the one it is fighting in the U.S. (and expected to appeal), allowing retailers to freely set prices for the next two years. The EU’s European Commission issued a press release earlier today (via Cnet):

Antitrust: Commission market tests commitments proposed by Simon & Schuster, Harper Collins, Hachette, Holtzbrinck and Apple for the sale of e-books

The European Commission is inviting comments from interested parties on 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. The proposed commitments aim to alleviate concerns that these companies may have engaged in an anti-competitive concerted practice affecting the sale of e-books in the European Economic Area (EEA). If the market test confirms that the commitments are suitable to address the Commission’s competition concerns, the Commission may make them legally binding on the companies.

The Commission considers at this stage that these companies may have breached EU antitrust rules that prohibit cartels and restrictive practices by jointly switching the sale of e-books from a wholesale model to agency contracts containing the same key terms (in particular an unusual so-called “Most Favoured Nation” – MFN – clause for retail prices). The agency model allows more control by publishers over retail prices. The Commission has concerns that this switch may have been the result of collusion between competing publishers, with the help of Apple, and may have aimed at raising retail prices of e-books in the EEA or preventing the emergence of lower prices.

In the proposed commitments, the five companies offer to terminate 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 does not exceed the total annual amount of the commissions that the retailer receives from the publisher.

Interested parties can submit comments within one month from the date of publication.

Background

Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article 53 of the EEA Agreement prohibit agreements and concerted practices which may affect trade and prevent or restrict competition.

After unannounced inspections in March 2011 (see MEMO/11/126), the Commission opened proceedings in December 2011 against Simon & Schuster, Harper Collins, Hachette, Holtzbrinck, Penguin and Apple (see IP/11/1509). Following discussions with the Commission, four of these publishers and Apple offered commitments with a view to seeking an early resolution of the case. Penguin (Pearson group, United Kingdom) has not offered any commitments and the investigation into their conduct is on-going.

If the market test indicates that the commitments are a satisfactory solution to the Commission’s competition concerns, the Commission may adopt a decision under Article 9 of the EU’s antitrust Regulation 1/2003, to make them legally binding on Simon & Schuster, Harper Collins, Hachette, Holtzbrinck and Apple. Such an Article 9 decision does not conclude that there is an infringement of EU antitrust rules but legally binds the companies concerned to respect the commitments offered. If a company breaks such commitments, the Commission can impose a fine of up to 10% of its annual worldwide turnover, without having to find an infringement of the antitrust rules.