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Amazon wins price battle with Apple

Dec 13 2012 15:07
Reuters
Brussles - European Union regulators ended an antitrust probe into e-book prices on Thursday, accepting an offer by Apple and four publishers to ease pricing restrictions on Amazon and other retailers.

The decision hands online retailer Amazon a victory in its attempt to sell e-books cheaper than rivals in a fast-growing market publishers hope will boost revenue and customer numbers. Reuters first reported in November that the Commission was accepting the settlement offer.

The European Commission said on Thursday the concessions from Apple and the publishers soothed concerns that their pricing deals curbed competition.

"The commitments proposed by Apple and the four publishers will restore normal competitive conditions in this new and fast-moving market, to the benefit of the buyers and readers of e-books," EU Competition Commissioner Joaquin Almunia said.

Apple and the publishers offered to let retailers set prices or discounts for a period of two years, and also to suspend "most-favoured nation" contracts for five years.

Such clauses bar publishers Simon & Schuster, News Corp. unit HarperCollins, Lagardere SCA's Hachette Livre and Verlagsgruppe Georg von Holtzbrinck, the owner of German company Macmillan, from making deals with rival retailers to sell e-books more cheaply than Apple.

The agreements, which critics say prevent Amazon and other retailers from undercutting Apple's charges, led to the EU antitrust investigation in December last year.

Pearson Plc's Penguin group, which is also under investigation, was not part of Thursday's settlement. The Commission said Penguin had offered concessions expected to resolve the matter with the competition authorities.

Companies found guilty of infringing EU rules can be fined up to 10 percent of their global sales, which in Apple's case could reach $15.6 billion, based on its 2012 fiscal year.

UBS analysts estimate e-books account for about 30% of the US book market and 20% of sales in Britain but are minuscule elsewhere. Amazon charged $9.99 per book when it launched its Kindle e-reader.

Apple's agency model let publishers set prices in return for a 30% cut to the maker of iPhone and iPad.

According to Albert Greco, a professor at Fordham University, Amazon's share of the US e-book market reaches 65%, ahead of Barnes & Noble's 27% share.

HarperCollins, Simon & Schuster and Hachette have settled with the US Department of Justice in a similar investigation but Apple, Penguin Group and Macmillan have not.

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