Penguin Ending e-Book Deal with Apple to Resolve EU Antitrust Case

British media group Pearson’s Penguin unit has offered to end e-book deals with Apple that imposed price restrictions on Amazon and other retailers, EU antitrust regulators said on Friday.

Penguin is the last publisher still negotiating with the Commission as Apple and the other accused publishers reached a settlement in December. However, at the beginning Apple seemed unwilling to settle, but as it appeared, the iBook seller eventually softened its stance.

In December of 2011, the Commission began looking into allegations of illegal agreements between Apple, Hachette Livre, Penguin, Harper Collins, Simon & Schuster, and Verlagsgruppe Georg von Holzbrinck.

A customer looks over the iPad mini after the device went on sale at Apple's retail store in Palo Alto

Apple entered the e-book business with the launch of its iPad in 2010. Since then, the iBookstore has also become available on the iPhone and iPod touch. Apple and the other five major book publishers were suspected of colluding over inflated e-book pricing through the company’s iBookstore that allegedly helped take some market share away from industry leader Amazon.

Therefore, Apple facilitated a change in e-book pricing to what is known as the “agency model” because of competition from the Amazon Kindle. This agency model accepts the fact that book publishers set consumer prices for e-books they publish. In addition, this allows the company serving the content to take a cut of sales. Consequently, that allowed Apple to take a 30 percent share of titles sold on the iBookstore.

The ending of the “agency model” pricing will probably be extremely beneficial for ebook giant Amazon, which prefers the “wholesale model.”

If the European Commission accepts this offer, Penguin the will be made the fifth book publisher to settle with regulators, a 16-month long investigation being brought to an end, without any finding of wrongdoing or fine.

The main idea, the regulators were concerned about, was related to the pricing deals that could hold back development of the e-book market, with higher prices for consumers. Amazon has the biggest share of that market.

Penguin’s adjustment includes ending “the most-favored nation” contracts for five years. Such clauses stop competition from selling e-books more cheaply than Apple.

In addition, the agreement will allow retailers to set prices and discounts for two years, as is the case with the other publishers that have settled with the Commission.

Interested parties have a month to comment on Penguin’s proposals before the Commission makes a final decision. However, as stated above, none of the parties involved in the investigation have been named guilty of any wrongdoing, and the Commission has assessed no fines.

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