Apple has folded in an EU antitrust investigation on ebook pricing, joining four other publishers in restoring Amazon's ability to dump ebooks below cost. The move comes even while Apple continues to vigorously defend itself in a nearly identical case in the U.S.
In both cases, Apple and five major publishers were accused of anticompetitive practices relating to Apple's iBooks platform. Apple engineered a makeover of the industry by signing publishers to distribution contracts with agency pricing.
This is the same pricing model Apple uses for music, TV, movies, and apps, and it allowed publishers to price their titles as they wished, while Apple took 30 percent off the top. It included a clause that prevented publishers from allowing their books to be offered for less elsewhere, which earned the nickname of the "most favored nation" clause.
Publishers embraced this deal because they were concerned about Amazon's practice of dumping ebooks to gain share for its Kindle platform. Amazon routinely priced best sellers and some other books below their own wholesale cost, and the company garnered 90 percent of the ebook market as a consequence.
In addition to fearing Amazon's monopoly power in this market, publishers were concerned that Amazon was training customers to value best sellers at $9.99, the typical price it would charge.
Antitrust regulators in the U.S. and EU leapt into action, concerned that the industry was engaging in price fixing in cahoots with Apple. In the U.S., Apple and two publishers vowed to fight, but Reuters reported on Tuesday that Apple and four publishers had proposed a plan that would end the agency model and restore Amazon's ability to dump.
More specifically, Reuters reported that those EU regulators are going to accept the deal proposed. That deal includes the promise not to use the agency model for two years and to not have a most favored nation agreement for five years.