updated 10:50 pm EST, Wed March 2, 2011
EU investigates publishers over e-book deals
The European Commissionpreliminary UK investigations and suspected the unnamed companies of having "violated EU antitrust rules" by pushing for the agency model in the iBookstore, the Kindle Store and other portals. The structure lets publishers set the pricing and has raised worries of collusion and price fixing that would keep e-books artificially expensive.
Most of the focus so far is believed to have been on more regional publishers such as France's Albin Michel and Hachette Livre, while HarperCollins, Penguin and Random House haven't witnessed raids so far.
Representatives for the Commission were cautious not to make conclusions and said the investigation was in a "very early stage." Any in-depth result could potentially draw in UK investigators to eliminate overlap.
A formal legal action could have deep ramifications for Amazon and Apple. Most major publishers switched to the agency model after Apple hoped to lure them away with more favorable terms. Until the switch, publishers on the Kindle Store and other shops mostly adhered to a wholesale model, where the store owner set the price and publishers charged a flat rate. The method led to lower prices, often $10 or less at Amazon, but led to complaints from publishers. Most were concerned that Amazon was regularly selling below cost and setting artificial expectations for e-book pricing that couldn't be met in the long term.
Amazon was a strong advocate of wholesale, which it used to inflate Kindle market share, but was strongarmed both after the agency model switch and Apple's "most favored nation" terms, which would have prevented publishers from offering a better price elsewhere. [via WSJ]