Apple agreement with the European Union would allow lower Amazon e-book prices

The deal – which would end an antitrust investigation targeted at Apple's e-book pricing in Europe and allow Amazon to sell e-books more cheaply – is good news for Amazon but bad news for publishers.

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    The deal, which the EU regulators are poised to accept, allows retailers like Amazon the ability to set their own prices or discounts for a period of two years.
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Apple and four publishers are close to cutting a deal with European Union regulators that will enable Amazon to offer lower e-book prices and end an antitrust investigation into Apple’s e-book pricing in Europe.

The decision effectively hands Amazon a victory in e-book pricing, allowing it to sell e-books more cheaply than its rivals. According to Reuters, a deal was offered to EU regulators in September by Apple and four publishers: News Corp. unit HarperCollins, Simon & Schuster, Lagardere SCA’s Hachette Livre, and Verlagsgruppe Georg von Holtzbrinck, the owner of Germany’s Macmillan. (Pearson’s Penguin group, also part of the investigation, did not take part in the settlement offer.)

The deal, which the EU regulators are poised to accept, allows retailers like Amazon the ability to set their own prices or discounts for a period of two years. It also suspends “most favored nation” contracts for a period of five years. Such contracts bar publishers from making deals with rival retailers to sell e-books more cheaply than Apple.

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It was these contracts, which effectively prevented Amazon and other retailers from undercutting Apple’s e-book pricing, which sparked the EU investigation last December.

“The Commission is likely to accept the offer and announce its decision next month,” an EU source said, according to Reuters.

Industry analysts chalk this up as a win for Amazon and consumers and more bad news for publishers.

“It's certainly another win for Amazon,” Mark Cooper, founder of Smashwords, an e-book publisher and distributor that works with Apple, told Reuters. “I have not seen the terms of the final settlement, but my initial reaction is that it places restrictions on what publishers can do, slowing them down just when they need to be more nimble.”

The EU’s probe has been running parallel to a similar investigation in the U.S. conducted by the Justice Department against Apple and several publishers. The European decision will likely have reverberations in the U.S. suit against Apple and several publishers.

Apple’s American antitrust woes arose last spring when the DOJ accused it and five publishers of conspiring to fix prices and forcing Amazon to raise prices. In the U.S., three of the five publishers – HarperCollins, Simon & Schuster, and Hachette – settled. Apple, Macmillan, and Penguin Group have denied wrongdoing and have decided to fight the suit in court in a trial scheduled for early next year.

On the heels of the EU settlement news, writes CNET, the big question now is whether Apple and the remaining publishers will seek a similar settlement in the U.S.

Stay tuned.

Husna Haq is a Monitor correspondent.

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