European antitrust watchdog probing Apple, e-book sellers over a possible price fixing

Apple and five major e-book publishers are being probed by the European Commission over worries that the parties have colluded to restrict competition in the market for e-books, reports Associated Press. The Commission issued the following statement:

The Commission will in particular investigate whether these publishing groups and Apple have engaged in illegal agreements or practices that would have the object or the effect of restricting competition in the EU or in the EEA. The Commission is also examining the character and terms of the agency agreements entered into by the above named five publishers and retailers for the sale of e-books. The Commission has concerns, that these practices may breach EU antitrust rules that prohibit cartels and restrictive business practices (Article 101 of the Treaty on the Functioning of the European Union – TFEU). The duration of antitrust investigations depends on a number of factors, including the complexity of each case, the extent to which the undertakings concerned cooperate with the Commission and the exercise of the rights of defense.

Adamant to determine whether e-book publishers worked to fix prices, the Commission said it will be taking a closer look at the agreements between Apple and e-book retailers that define the retailer’s cut of the profit, price points and other business terms. Earlier this year in March, the Commission conducted a raid of the offices of several e-book publishers. Apple, as you know, operates iBookstore that sells e-books for iOS devices and keeps 30 percent of the proceeds to itself.

The five e-book publishers being scrutinized: Hachette Livre, a unit of France’s Lagardere Publishingl; Harper Collins, owned by Rupert Murdoch’s U.S.-based News Corp.; CBS Corp.’s Simon & Schuster; Penguin, owned by U.K. publishing house Pearson Group; and Germany’s Verlagsgruppe Georg von Holzbrinck.

Fortune’s Philip Elmer-DeWitt opined the reason why Eurpean regulators targeted Apple’s ‘e-book cartel’, as he put it, lies in a deal that Steve Jobs cut with the five publishers shortly before the January 2010 iPad announcement. A similar investigation dated August 2010 had been conducted in the United States as Connecticut Attorney General Richard Blumenthal accused Amazon and Apple of anticompetitive pricing strategies. The market for e-books is directly tied to the popularity of standalone e-book readers and, to a lesser extent, tablets with e-reading capabilities. According to DigiTimes Reasearch, e-book reader shipment growth will reach 31.4 percent in 2012 to hit 28.9 million units, with pricing remaining the major attraction to stimulate sales growth.