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European Commission

Press release

Brussels, 19 April 2013

Antitrust: Commission market tests commitments proposed by Penguin for the sale of e-books

The European Commission is inviting comments from interested parties on commitments offered by Penguin (Pearson Group, United Kingdom). The proposed commitments aim to alleviate concerns that Penguin may have engaged in an anti-competitive concerted practice affecting the sale of e-books in the European Economic Area (EEA). They are substantially the same as those proposed by Simon & Schuster, Harper Collins, Hachette, Holtzbrinck and made legally binding by the Commission in December 2012 (see IP/12/1367). If the market test confirms that Penguin's commitments are suitable to address the Commission's competition concerns, the Commission may make them legally binding on Penguin.

The Commission considers at this stage that Penguin, together with the aforementioned four publishers and Apple may have breached EU antitrust rules that prohibit cartels and restrictive practices by jointly switching the sale of e-books from a wholesale model to agency contracts containing the same key terms (in particular an unusual so-called "Most Favoured Nation" – MFN – clause for retail prices). The agency model allows more control by publishers over retail prices. The Commission has concerns that this switch may have been the result of collusion between competing publishers, with the help of Apple, and may have aimed at raising retail prices of e-books in the EEA or preventing the emergence of lower prices.

In the proposed commitments, Penguin offers to terminate 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.

Interested parties can submit comments within one month from the date of publication.

Background

Article 101 of the Treaty on the Functioning of the European Union (TFEU) and Article 53 of the EEA Agreement prohibit agreements and concerted practices which may affect trade and prevent or restrict competition.

After unannounced inspections in March 2011 (see MEMO/11/126), the Commission opened proceedings in December 2011 against Simon & Schuster, Harper Collins, Hachette, Holtzbrinck, Penguin and Apple (see IP/11/1509). In September 2012, the Commission consulted stakeholders on draft commitments offered by Simon & Schuster, Harper Collins, Hachette, Holtzbrinck and Apple to remedy the Commission's preliminary concerns (see IP/12/986). In December 2012 the Commission made those commitments legally binding on Apple and the four publishers.

Penguin chose not to offer commitments to the Commission at the same time as the other parties. Following constructive discussions with the Commission, however, Penguin recently offered commitments with a view to seeking an early closure of the proceedings.

If the market test indicates that the commitments are a satisfactory solution to the Commission's competition concerns, the Commission may adopt a decision under Article 9 of the EU's antitrust Regulation 1/2003, to make them legally binding on Penguin. Such an Article 9 decision does not conclude that there is an infringement of EU antitrust rules but legally binds the companies concerned to respect the commitments offered. If a company breaks such commitments, the Commission can impose a fine of up to 10% of its annual worldwide turnover, without having to find an infringement of the antitrust rules.

More information on the case, including the full non-confidential version of the commitments, is available at:

http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=1_39847

Contacts :

Antoine Colombani (+32 2 297 45 13, Twitter: @ECspokesAntoine )

Marisa Gonzalez Iglesias (+32 2 295 19 25)


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