Antitrust Law Daily Wrap Up, ANTITRUST NEWS: European Commission Seeks Comment on Proposed Penguin Commitments Regarding E-Book Sales, (Apr 19, 2013)

By Tobias J. Gillett, J.D., LL.M.

The European Commission is seeking comment on proposed commitments by publishing company Penguin Group, a unit of Pearson Group, to resolve anticompetitive concerns raised by allegedly anticompetitive concerted activities in the market for e-books in the European Economic Area (EEA), the EC announced today. The EC may make the commitments legally binding on Penguin if the market test confirms that they would appropriately address the EC’s concerns. The EC announcement comes as the U.S. Department of Justice on Thursday moved for entry of its proposed final judgment resolving similar allegations.

In December 2011, the EC opened proceedings against publishers Penguin, Simon & Schuster, Harper Collins, Hachette, and Holtzbrinck, as well as technology company Apple, over their joint decision to transition from a wholesale model for the sale of e-books to agency contracts containing the same key terms, including a most favored nation (MFN) clause for retail prices. The EC alleged that Apple and the publishers may have violated EU antitrust rules prohibiting cartels and restrictive practices, and that the transition may have aimed at raising retail prices of e-books in the EEA or preventing the emergence of lower prices.

The EC asserts that Penguin’s proposed commitments are "substantially the same as those proposed by Simon & Schuster, Harper Collins, Hachette, and Holtzbrinck." In its commitments, Penguin pledges to terminate its existing agency agreements and refrain from adopting price MFN clauses for five years. In case Penguin would enter into new agency agreements, retailers would be free to set the retail price of e-books during a two-year period, provided the aggregate value of price discounts granted by retailers does not exceed the total annual amount of the commissions that the retailer receives from the publisher. A breach of the commitments would permit the EC to assess a fine of up to 10 percent of Penguin’s worldwide turnover, without having to find an antitrust violation.

Simon & Schuster, Harper Collins, Hachette, Holtzbrinck and Apple previously elected to offer commitments to resolve the EC’s concerns. Following a market test in September 2012, the EC made those commitments legally binding in December 2012. Penguin chose not to make commitments at that time, but continued to engage in discussions with the EC that resulted in the present commitments.

Interested parties may submit comments on the proposed commitments within one month following the date of their publication.

Companies: Penguin Group; Pearson Group

News: Antitrust