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EC Opens Antitrust Proceedings To Investigate Apple, E-book Publishers ‘Cartel’

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The European Commission this morning announced that it has opened formal antitrust proceedings to investigate whether a number of international ebook publishers have engaged in anti-competitive practices affecting the sale of e-books in Europe, “possibly with the help of Apple” (which offers an e-book storefront called iBooks).

According to the press release, the opening of proceedings means that the EC will “treat the case as a matter of priority”.

The publishers that were identified in the announcement of the antitrust probe are Hachette Livre (Lagardère Publishing, France), Harper Collins (News Corp., USA), Simon & Schuster (CBS Corp., USA), Penguin (Pearson Group, United Kingdom) and Verlagsgruppe Georg von Holzbrinck (owner of inter alia Macmillan, Germany).

The Commission says it will, in particular, investigate whether these publishers and Apple have engaged in illegal agreements or practices that would “have the object or the effect of restricting competition” in the European Union or in the European Economic Area (EEA).

The commission is also looking into “agency agreements” between the publishers and e-book retailers, in collaboration with the UK Office of Fair Trading.

The EC says it is concerned whether some of the publishers’ and Apple’s practices “may breach EU antitrust rules that prohibit cartels and restrictive business practices”. The opening of the proceedings follows unannounced inspections that were carried out by the Commission at the premises of several e-book publishers in March 2011.

Serious stuff, in other words.

Update: Fortune’s Philip Elmer-DeWitt on why Europe is targeting Apple and not Amazon.

(Image courtesy of Flickr user alancleaver_2000)

Here’s the full press release:

Antitrust: Commission opens formal proceedings to investigate sales of e-books

Brussels, 06 December 2011 – The European Commission has opened formal antitrust proceedings to investigate whether international publishers Hachette Livre (Lagardère Publishing, France), Harper Collins (News Corp., USA), Simon & Schuster (CBS Corp., USA), Penguin (Pearson Group, United Kingdom) and Verlagsgruppe Georg von Holzbrinck (owner of inter alia Macmillan, Germany) have, possibly with the help of Apple, engaged in anti-competitive practices affecting the sale of e-books in the European Economic Area (EEA)1, in breach of EU antitrust rules. The opening of proceedings means that the Commission will treat the case as a matter of priority. It does not prejudge the outcome of the investigation.

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 defence.

Background on the ebooks investigation

In March 2011, the Commission carried out unannounced inspections at the premises of several companies active in the e-book publishing sector in several Member States (see MEMO/11/126).

To date, the Commission and the UK Office of Fair Trading have investigated in parallel and in close cooperation whether arrangements for the sale of e-books may breach competition rules. Before the Commission opened formal proceedings, the OFT had closed its investigation on grounds of administrative priority. The OFT has made a substantial contribution to the ebooks investigation and will continue to co-operate closely with the Commission going forward.

Background on antitrust investigations

Article 101 of the TFEU prohibits agreements and concerted practices which may affect trade and prevent or restrict competition. The implementation of this provision is defined in the Antitrust Regulation (Council Regulation No 1/2003) which can be applied by the Commission and by the national competition authorities of EU Member States.

The legal base for the Commission’s opening of formal proceedings is Article 11(6) of the Antitrust Regulation (Council Regulation No 1/2003).

Article 11(6) of the Antitrust Regulation provides that the initiation of proceedings by the Commission relieves the competition authorities of the Member States of their competence to also apply EU competition rules to the practices concerned. Article 16(1) further provides that national courts must avoid giving decisions, which would conflict with a decision contemplated by the Commission in proceedings that it has initiated.

The Commission has informed the companies and the competition authorities of the Member States that it has opened proceedings in this case.