On 19 September 2012, the EC invited comments on proposals put forward by four international publishers and Apple to settle an investigation by the EC concerning the sale of e-books in the EU. The case provides a reminder that companies must set their terms and conditions of trade independently and about the risks of most favoured nation clauses (in this case a most favoured customer (MFC) clause), particularly where the practice is industry-wide or the company imposing the requirement has a strong market position.
The EC is concerned that the companies may have breached EU competition law by colluding to switch the sale of e-books by the publishers from a wholesale model using distributors to agency contracts containing the same key terms. The agency model allows more control by publishers over resale prices, since under EU competition law where an agent is a “true agent”, then the principal can set its agent’s resale price (and other terms and conditions of trade). The EC considers that this switch may have been aimed at raising the retail price of e-books in the EU or at least at preventing lower prices.
In addition to this alleged collusion, the EC has particular concerns about one aspect of the publishers’ new agency agreements with Apple. This is an MFC clause regarding the sale of e-books in the EU by Apple. The EC’s view is that the inclusion of this clause meant that, to avoid lower revenues and margins for their e-books on the iBookstore, the publishers had to pressure other major e-book retailers offering e-books to consumers in the EU also to adopt the agency model.
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