EU to e-book publishers: We'll settle--if you do as we say
The European Union is not too pleased with e-book publishers, but that doesn't mean it won't settle with them.
Speaking to reporters today, European Union Competition Commissioner Joaquin Almunia said that his organization would settle with e-book publishers as long as they "remove all of our objections." Reuters was first to report on the news.
Almunia reportedly didn't tell the journalists about the nature of the objections, but confirmed that deals could be struck with e-book publishers Pearson, Penguin, and Simon & Schuster (which is owned by CBS, CNET's parent company), among others.
The European Commission launched an investigation into the e-book publishers in December to determine if they "engaged in anti-competitive practices affecting the sales of e-books in the European Economic Area." More specifically, the Commission said that it would determine if Apple and the e-book publishers "engaged in illegal agreements or practices that would have the object or the effect of restricting competition in the EU."
The stakes are high for all the companies involved. If they're found in violation of any standards, they could face a fine of up to 10 percent of their global sales. A settlement would, of course, cost much less.
However, settling a case in the EU might have costly ramifications in the U.S. where it was reported last week that the Justice Department is preparing to launch an antitrust lawsuit against Apple and e-book publishers. As in the EU, U.S. regulators are concerned that the companies worked together to hurt Amazon's Kindle e-book store and raise prices in the marketplace.
There's no question e-book prices have gone up since Apple entered the market with iBooks. The reason for that is the so-called agency model, which allows publishers to set the price and e-book store owners, like Apple and Amazon, to take a piece of the revenue. Previously, Amazon had wholesale deals in place that kept prices lower.
Apple CEO Steve Jobs acknowledged that his company used the agency model to coax publishers to his side in an interview last year with his biographer Walter Isaacson.
"We told the publishers, 'We'll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that's what you want anyway," Jobs told his biographer. "They went to Amazon and said, 'You're going to sign an agency contract or we're not going to give you the books.'"
That said, Apple argues that what it has done with its iBooks platform is by no means an attempt on the company's part to take down Amazon--a company that it said in a recent court filing, is no threat:
"Nor does this 'Kindle theory' make sense on its own terms. For example, if Amazon was a 'threat' that needed to be squelched by means of an illegal conspiracy, why would Apple offer Amazon's Kindle app on the iPad?
"Why would Apple conclude that conspiring to force Amazon to no longer lose money on eBooks would cripple Amazon's competitive fortunes? And why would Apple perceive the need for an illegal solution to the 'Kindle threat' when it had an obvious and lawful one which it implemented--namely, introducing a multipurpose device (the iPad) whose marketing and sales success was not centered on eBook sales?"
The European Commission did not immediately respond to CNET's request for comment on its settlement plans.