European Union in antitrust probe of Apple, e-book publishers

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The European Union's antitrust watchdog is probing whether Apple helped five major publishing houses illegally raise prices for e-books when it launched its iPad tablet and iBookstore in 2010.

The probe, announced today by the European Commission, offers a glimpse into the fierce fight for shares of the growing e-book market, especially as Apple has tried to take on Amazon and its Kindle e-book reader.

It also highlights the struggle for profits between retailers and publishers, as more and more readers download books electronically. In particular, the Commission is investigating a significant shift in the way the price of e-books is determined that occurred in 2010, just as Cupertino, California-based Apple introduced the iPad and its own online bookshop, iBookstore.

Apple was the first retailer that allowed publishers to move to so-called agency agreements, which let publishers set the price that online bookshops sell e-books to consumers. Until then, publishers were able to set the wholesale price of e-books, while retailers decided what price to sell them on to readers.

"The Commission has concerns that these practices may breach EU antitrust rules that prohibit cartels and restrictive business practices," the regulator said in a statement.

Giving publishers the power to set retail prices could effectively restrict competition between online bookshops, since it takes away individual retailers' powers to set lower prices. Since Apple's deal with the publishers, several other online retailers have also shifted to the agency model, possibly in an attempt to secure the rights to sell popular e-books.

The EU investigation targets publishers Hachette Livre, a unit of France's Lagardere Publishing; Harper Collins, owned by Rupert Murdoch's US-based News Corp; CBS Corp's Simon & Schuster; Penguin, which is owned by U.K. publishing house Pearson Group; and Germany's Verlagsgruppe Georg von Holtzbrinck, which owns Macmillan.

The Commission stressed the probe was in its early stages and did not mean the companies actually broke EU competition law.

It follows a similar investigation by Britain's Office of Fair Trading and a class action lawsuit against the same five publishers and Apple filed this summer in the US District Court for the Northern District of California.

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