Tuesday, 6 December 2011

Apple Faces Antitrust Investigations


Apple is in hot waters again with the European Union as antitrust regulators have launched a formal investigation regarding its pricing strategies in the e-book market and its possible collusion with publishers to raise e-book prices. Along with the tech giant, five major publishing houses are also listed under formal scrutiny, and they are France’s Hachette Livre, a unit of Lagardere SCA, Gemany’s Macmillan, owned by Verlagsgruppe Georg von Holtzbrinck, U.K.’s Penguin, part of Pearson Group, as well as U.S.’s Harper Collins under News Corp. and Simon & Schuster under CBS Corp. According to officials based in Brussels, the European Commission is probing into whether the six defendants “have engaged in illegal agreements or practices that would have the object or the effect of restricting competition”.

The EU investigation might have “sparked from a coordinated effort years ago between Apple and [various] publishers to abolish Amazon’s then-typical $9.99 e-book pricing,” noted Fortune’s Philip Elmer-DeWitt. More specifically, Apple launched a new pricing strategy called agency agreement, which allowed publishers to set the price at which online bookshops sell e-books to consumers. Previously, publishers only had the power to decide the wholesale price of e-books, and the retail prices at which readers purchased their e-books were set by each individual retailer. This move by Apple effectively reduced competition between online bookshops, since retailers could no longer compete by setting lower retail prices. Seattle-based Hagens Berman, the firm behind a new class action antitrust lawsuit filed against Apple and the same five publishers in the US in August 2011, further argues that this strategy had forced “e-book rival Amazon to abandon its pro-consumer discount pricing”.

The U.K. Office of Fair Trading, which had already started a similar inquiry earlier in February, has closed its own investigation to allow the European Commission to take over and broaden the scope of the inquiry to the whole of Europe. The British agency commented that it will continue to work closely with the Commission since its original investigation was triggered by several complaints, but it has not disclosed any names. Although there are arguments both for and against Apple following the announcement of an EU-wide probe, the tech giant itself has refused to offer a public response so far.


Jennifer Zhang

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