updated 06:25 pm EST, Tue February 1, 2011
UK agency joins US in investigating e-book prices
The UK's Office of Fair Trading said on Tuesday that it would look into possible antitrust violations in the pricing set by e-book retailers and publishers. It said it had received a "significant number of complaints" about the pricing. While no companies were named, the WSJ heard the issue was with the agency business model used by Amazon's Kindle store and Apple's iBookstore in collaboration with at least HarperCollins and Penguin.
The system lets publishers set their own prices and leaves both Amazon and Apple to take a fixed percentage of every sale, which now usually equates to 30 percent. It prevents a retailer from deliberately selling books at a loss to unfairly drive market share, as Amazon had been doing until it was strong-armed into agreeing to the agency model. However, it can also lead to the same price across all stores and consequently favor larger bookstores that don't have to worry about price competition from independents.
Both Connecticut and Texas in the US have been investigating the deals for the same reasons.
Office of Fair Trading officials didn't link their own investigation to the American equivalents and warned it was at an "early stage" where it wouldn't necessarily make any formal accusations.
The agency model is widely believed to have been brought on by Apple, which started a pricing war. It hoped to attract publishers afraid Amazon was setting e-book prices too low but also set a no-lower-pricing policy in place that prevented publishers from selling at a lower rate at a competitor. Amazon had already been pushing for a no-better policy but was pushed into making similar deals at the risk of seeing publishers leave for more profitable terms at Apple's store.
A ruling against Apple in any one of the jurisdictions could lead to a radical break in e-book pricing and possibly lower pricing, primarily for more expensive bestsellers. These can often cost $12 to $15 where Amazon had previously been pricing them at $10 and dismissing publisher requests for more.