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Concurrences

Revue des droits de la concurrence

Competition Law Journal

e-Books and the boundaries

of Antitrust

Tendances l Concurrences N° 3-2012 – pp. 12-29

David Bosco
bosco.dav@gmail.com
l Professor, Aix-Marseille University

Jonathan M. Jacobson
jjacobson@wsgr.com
l Partner, Wilson Sonsini Goodrich & Rosati

Kimberley A. Piro
kpiro@wsgr.com
l Associate, Wilson Sonsini Goodrich & Rosati

Geoffrey A. Manne
gmanne@laweconcenter.org
l
Executive Director of the International Center for Law & Economics and Lecturer in Law
at Lewis & Clark Law School in Portland, Oregon

William Rinehart
wrinehart@laweconcenter.org
l Director of Operations, the International Center for Law & Economics

Fabrice Siiriainen
fabrice.siiriainen@gredeg.cnrs.fr
l Professeur, Université de Nice-Sophia Antipolis
l Avocat, Dauzier et Associés

Mark Powell
mpowell@whitecase.com
l Partner, White & Case LLP

Audrey Oh
aoh@whitecase.com
l Legal assistant, White & Case LLP

Electronic copy available at: http://ssrn.com/abstract=2140778

Tendances e-Books and the boundaries of Antitrust

David Bosco
Introduction

Kimberley A. Piro
kpiro@wsgr.com
Associate, Wilson Sonsini Goodrich & Rosati 1. A new market is coming into light and spreading. Even if its expansion is evolving
different rhythms on both sides of the Atlantic, the fact is obvious: e-Books are part
Geoffrey A. Manne of the future of our modern societies. Therefore, everyone is keeping a watchful eye
gmanne@laweconcenter.org
on the evolution of the balance of power on the e-book market: the consumers, the
Executive Director of the International Center various competitors who are confronting one another on the market, but also public
for Law & Economics and Lecturer in Law at authorities and, among them, competition authorities. Thus, we have good reasons
Lewis & Clark Law School in Portland, Oregon to believe that the “product” involved is quite peculiar. It is not a consumer good
like the others. With it, stories, ideas, dreams, knowledge, are being passed around.
William Rinehart Through this type of media, the history and the fate of our peoples are handed
wrinehart@laweconcenter.org
down. They build our common culture. Can we reasonably and fearlessly hand over
Director of Operations, the International Center such a precious good to the market? Our trust in the free play of the market forces
for Law & Economics is being tried. Could the free competition, this formidable “discovery procedure” as
Hayek said1, be a threat to our discoveries? After all, the e-book problem deals with
Fabrice Siiriainen the boundaries that we want to give to the antitrust. At least two questions arise: is
fabrice.siiriainen@gredeg.cnrs.fr
the e-book problem a matter of antitrust or could it be one? If it’s one that antitrust
Professeur, Université de Nice-Sophia Antipolis can deal with, what method could we use to treat it?
Avocat, Dauzier et Associés
*
Mark Powell
mpowell@whitecase.com
2. Is the e-book market a breeding field for the action of competition authorities?
Partner, White & Case LLP In other words: is it appropriate to entrust competition authorities the task of
making free competition reign among rivals on a market so specific? There are
Audrey Oh drastic different points of view concerning this subject.
aoh@whitecase.com
Legal assistant, White & Case LLP 3. In the United States, the answer is quite clear. The Department of Justice
has lodged a highly mediatized complaint against the contractual relationships
between Apple and several publishers2. As stressed by Jonathan M. Jacobson,
Kimberley A. Piro3, Geoffrey A. Manne and William Rinehart4, Apple is blamed
for having concluded agency agreements with the main publishers in the United
Abstract States. These contracts allow publishers to fix a retail price which is imperative upon
all the distributors selling e-books and forbid them to sell cheaper than the price
T he e-book market is quite remarkable. The economic charged on Apple’s iBookstore. This strategy without doubt aims at opposing the
models for the distribution of this unique product are original
and differ from one jurisdiction to another. The antitrust
policy of low prices at Amazon but results in the increase in prices for consumers.
litigations, in both the US and Europe, against Apple and The determination shown by the DOJ to fight this is quite remarkable. This is a
publishing companies as well as the French law on e-Book reminder of the Microsoft case5. The DOJ’s complaint arose deep controversies.
price-fixing are challenging the boundaries of antitrust.
But nobody disputes the fact that antitrust law should seize the case, if however a
case exists. Also, the same agreements between various European publishers (and
possibly Apple…) have provoked the opening of a formal investigation by the
Le livre numérique est un bien tout à fait singulier. European Commission as explained by Mark Powell and Audrey Oh6.
Les modèles économiques de distribution de ce bien
particulier sont originaux et très différents d’un système
à l’autre. Les contentieux américain et européen autour
des pratiques d’Apple et des éditeurs, la loi française
sur le prix unique du livre numérique posent la question
des frontières de l’antitrust.

1
F. A. Hayek,“Competition as a Discovery Procedure”in New Studies in Philosophy, Politics, Economics and the History of Ideas.
Chicago: University of Chicago Press, 1978.
2
Complaint, United States v. Apple, Inc., No. 12-cv-2826 (S.D.N.Y. filed Apr. 11, 2012) and the answer of Apple, at 1,
United States v. Apple, Inc., No. 12-cv-2826 (S.D.N.Y. filed May 22, 2012).
3
See “Storm Over EBook Waters”.
4
See “The US eBooks Case Against Apple: The Procompetitive Story”.
5
See the final judgement US District Court for the district of Columbia, Civil action n° 98-1232.
6
See ‘‘e-Books in the EU: Competition, Pricing, and the Expansion of a New Digital Market’’.

Concurrences N° 3-2012 I Tendances 12 e-Books and the boundaries of antitrust

Electronic copy available at: http://ssrn.com/abstract=2140778
4. The ability of antitrust law to treat the problem does 7. The degree of maturity of the market and its very nature

6. But let’s assume that antitrust law is relevant to regulate

the e-book market, here’s another question: How should
it be handled? This is also a challenge for the boundaries
of antitrust, in a methodological way. France has made a
somewhat surprising choice in adopting a law. In the United
States, the method to solve the e-book problem is not yet
clear. Considering the determination of the DOJ and its
communication on the case, one could assume that the
DOJ wants to make an example of the Apple case and go
to trial. But the DOJ could settle too, like in the Microsoft
case. In Europe, it’s seems that a negotiated process is on
going: a settlement is being discussed with the European
Commission. But a prohibition decision pursuant to article 7
of the Regulation No 1/2003 could finally be made. A law?
A trial? A prohibition decision? A settlement? How to choose
the best method?

9
See in this sense Autorité de la concurrence, Avis n° 09-A-56 du 18 décembre 2009 relatif
à une demande d’avis du ministre de la culture et de la communication portant sur le livre
numérique.
10
See the investigation and the proposal of the Commission of Apple to… offer settlements
in the Google case. J. Almunia said: ‘‘I believe that these fast-moving markets
would particularly benefit from a quick resolution of the competition issues
identified. Restoring competition swiftly to the benefit of users at an early
7
Loi n° 2011-590 du 26 mai 2011 relative au prix du livre numérique.
stage is always preferable to lengthy proceedings, although these sometimes
See “Le livre numérique, entre prix unique, droit d’auteur et droit de la concurrence”.
8 become indispensable to competition enforcement’’, Speech/12/372, 21/05/2012.

Concurrences N° 3-2012 I Tendances 13 e-Books and the boundaries of antitrust

e-Books and the boundaries of Antitrust

Storm over E-books waters

Kimberley A. Piro
Associate, Wilson Sonsini Goodrich & Rosatiw

I. Introduction is that the alleged agreements generally, and Apple’s MFN

in particular, are necessary to make competitive inroads on
1. The outcry over the government’s eBooks case11 has Amazon’s monopoly of eBook retailing.
been loud. Apple says that “[t]he government sides with
monopoly, rather than competition, in bringing [the] case”12. 4. In the discussion that follows, we first examine the
Noted antitrust authority CNET proclaimed in a headline characteristics of the “agency” model and then address
that “DOJ is likely to lose eBook antitrust case targeting whether these arguments hold up17.
Apple”13. A number of blogs have been equally hostile14.

2. So what exactly is the claim that has launched this

firestorm? It is that the major book publishers, in concert
II. Characteristics of the agency
with Apple, (1) all agreed to change their pricing model model
from a “wholesale” model (in which retailers such as
Amazon determined the retail price) to an “agency” model 5. “Agency” and antitrust have long crossed paths in cases
(in which the publishers themselves determine the retail involving resale price-fixing. Prior to the 2007 decision in
price), (2) reinforced the agency system with an MFN Leegin18, it was unlawful per se under the Sherman Act for
clause that prohibits any of them from selling elsewhere at a supplier and a retailer to agree on the retail price to be
a price lower than offered through Apple’s iBookstore, and charged19. There were a number of exceptions to this per se
(3) raised eBook prices by over 30% as a result15. These rule, however, prominently including the “agency” exception.
are just allegations, of course, not proven facts; and only Under this exception, if the retailer was not an independent
the actual evidence will tell us whether there was collusion actor but, instead, was acting solely as the supplier’s agent,
or not. But, if proven, a conspiracy among all the major there was no “agreement” for Sherman Act Section 1
players in an industry to raise prices surely sounds like the purposes (and thus no illegal vertical price-fixing) because an
stuff of which legitimate antitrust cases are made. And, agent and principal are a single entity for antitrust purposes
here, our own common experience tells us that the price of and so cannot “conspire” together. Under the exception, the
eBooks has in fact increased from $10 to $13-$15 on popular agency must be genuine – with the supplier bearing the risk
books. And we know that the late Steve Jobs took credit for of loss for the goods, bearing responsibility for insurance,
organizing the publishers in this fashion in comments to his and the like – but as long as these formalities are followed,
autobiographer16. So one cannot say that the allegations are there is no Sherman Act violation20. Leegin eliminated the
completely made up. need to rely on the agency exception in many instances, but
the rule still remains: with a bona fide agency, there is no
3. The critics of the DOJ Complaint (and the private case agreement for Sherman Act purposes and the supplier is free
brought prior to DOJ’s suit) advance two primary criticisms. to set the retail price.
One is that the $10 price Amazon had been charging at
retail was unsustainably low and that a higher price point is 6. Before the agency model of eBook reselling was
necessary to keep the publishing industry healthy. The other implemented, publishers sold eBook titles to retailers on
a wholesale basis. Under the wholesale model, retailers
11
Complaint, United States v. Apple, Inc., No. 12-cv-2826 (S.D.N.Y. filed Apr. 11, 2012).
17
As a matter of historic interest, this not the first time there have been allegations of
12
Answer of Apple, at 1, United States v. Apple, Inc., No. 12-cv-2826 (S.D.N.Y. filed
cartelization of book publishing. As recounted by Ariel Katz, the events leading to the
May 22, 2012).
Supreme Court’s decision in Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908), were
13
D. McCullagh & G. Sandoval, DOJ is Likely to Lose eBook Antitrust similar in a number of respects. See A. Katz on “Intellectual Property, Competition,
Case Targeting Apple, CNET, Apr. 12, 2012, http://news.cnet.com/8301- Innovation, and Other Issues”, http://arielkatz.org/archives/1656 (Apr. 15, 2012).
13578_3‑57412861-38/doj-is-likely-to-lose-eBook-antitrust-suit-targeting-apple/. In an earlier related case, the New York Court of Appeals had found (contrary to current
law) that “a combination to fix the prices of copyrighted books alone would be legal.”
14
See, e.g., Truth on the Market, http://truthonthemarket.com/2012/04/12/the-
Id. Because of this, the publishers’ pricing requirements were altered to apply only to
procompetitive-story-that-could-undermine-the-dojs-e-books-antitrust-case-against-
copyrighted works. See id.
apple/#comment-41705 (Apr. 12, 2012).
18
Leegin Creative Leather Prods. v. PSKS, Inc., 551 U.S. 877 (2007).
15
See Complaint, United States v. Apple, Inc., No. 12-cv-2826 (S.D.N.Y. filed Apr. 11,
2012); see also In re Electronic Books Antitrust Litig., --- F. Supp. 2d ----, 2012 19
E.g., Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911).
WL 1946759 (S.D.N.Y. May 15, 2012).
20
See, e.g., ABA Section of Antitrust Law, Antitrust Law Developments 143-44
16
See Electronic Books, 2012 WL 1946759, at *5 (quoting comment by Jobs). (7th ed. 2012).

Concurrences N° 3-2012 I Tendances 14 e-Books and the boundaries of antitrust

possessed the ability to set prices as they desired. According
III. Potential justifications

Ce document est protégé au titre du droit d'auteur par les conventions internationales en vigueur et le Code de la propriété intellectuelle du 1er juillet 1992. Toute utilisation non autorisée constitue une contrefaçon, délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende
(art. L. 335-2 CPI). L’utilisation personnelle est strictement autorisée dans les limites de l’article L. 122 5 CPI et des mesures techniques de protection pouvant accompagner ce document. This document is protected by copyright laws and international copyright treaties. Non-authorised use of this document
constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment and up to a € 300 000 fine (Art. L. 335-2 Code de la Propriété Intellectuelle). Personal use of this document is authorised within the limits of Art. L 122-5 Code de la Propriété Intellectuelle and DRM protection.
to the DOJ’s Complaint, the defendant publishers found
particularly troubling Amazon’s decision to set eBook prices for concerted behavior
for various popular titles at $9.99. The publishers were
concerned that this low price point would instill in consumers 10. Because consumer prices appear quite clearly to have
the belief that books should not cost any more than $9.99, increased during the duration of the alleged conspiracy, the
which would lower the wholesale prices the publishers would DOJ should not encounter great difficulty in proving a prima
be able to command. So the publishers all had an interest in facie case of anticompetitive harm. Whether the DOJ may
counteracting this idea by taking control of eBook pricing. be able to prove express coordination among the various
Apple’s decision to enter the eBook business thus came at a defendants is less clear and will depend on the proof.
time when the publishers were anxious for an opportunity to
change the way eBooks were priced to consumers. 11. In May 2012, a district court denied Apple and certain
defendant publishers’ motion to dismiss a class action that
7. Two characteristics of the agency model implemented alleged harm arising out of higher eBook prices23. Among
by Apple and the defendant publishers are particularly other things, the court found that the private complaint
noteworthy. First, in response to Amazon’s $9.99 price point, “plausibly alleged that each Publisher Defendant’s decision
the agency agreements provided for tiered “maximum” price to sign its particular agency agreement with Apple and to
schedules set by the publishers, with price points of $12.99 demand that Amazon accept the agency model would have
and $14.99 for bestsellers, depending on the hardcover list contravened that defendant’s self-interest in the absence
price. Under this system, Apple received a commission of of similar behavior by its rivals”24. Comments from Steve
30% for all eBook sales, comparable to what it was getting Jobs before his death also can be read to suggest Apple’s
in music downloads on iTunes. The DOJ contends that the role in actual collusion25. And the DOJ’s Complaint alleges
$12.99 and $14.99 price tiers were not merely “maximum a number of publisher meetings at which agreements were
retail prices,” as specified in the written agreements, but purportedly reached.
represented the actual retail eBook prices the publisher
defendants would charge. As all defendant publishers were
contracting with Apple, the existence of these price points in 1. Ruinous Competition
the contracts (and the actual prices charged publicly on the
iBookstore) arguably facilitated the signaling of acceptable 12. Defenders of Apple and the publisher defendants claim
eBook prices to one another. Following their contracts with that Amazon’s low pricing caused publishers’ revenues
Apple, the defendant publishers secured similar agency to suffer in a manner likely to lead, ultimately, to the
agreements with Amazon and other major eBook retailers. suppression of output. Apple itself asserts that its entry
“spurred tremendous growth in eBook titles, range and
8. Second, Apple inserted MFN clauses into all the agency variety of offerings, sales, and improved quality of the eBook
agreements, which insulated it from retail price competition. reading experience”26. Because Amazon’s $9.99 price point
Specifically, the MFN “required each publisher to guarantee for eBooks was considerably lower than the corresponding
that it would lower the retail price of each eBook in Apple’s hardcover books’ retail prices, one of the publishers’ concerns
iBookstore to match the lowest price offered by any other was that hardcover book prices would decline. In addition,
retailer, even if the Publisher Defendant did not control that the publisher defendants were concerned that the downward
other retailer’s ultimate consumer price”21. This incentivized pressure in retail prices would prompt eBook retailers to
publishers to execute agency agreements with the other major demand lower wholesale prices. The challenged conduct,
eBook retailers, as maintaining control over pricing was key it is argued, was necessary to avoid this destructive spiral.
to profitability. Because each publisher had an MFN, they all In essence, this is a “ruinous competition” defense – that
could be assured of price uniformity at or above the $12.99 competition resulting in lower prices for consumers could
to $14.99 price levels. have the effect of lower producer profits and driving some
out of business. But the “ruinous competition” argument
9. The fact pattern, at least as alleged by the Justice has been rejected authoritatively in antitrust for well over a
Department, appears similar to the 1966 General Motors century.
case22, in which Los Angeles area Chevrolet dealers sought
to eliminate discounting and enlisted GM to enforce and 13. This defense was first rejected by the Supreme Court in
implement their agreement. 1897. In United States v. Trans-Missouri Freight Ass’n, 166
U.S. 290 (1897), a group of competing railway companies
entered into an agreement that established “reasonable rates”
for freight transportation. After emphasizing the public
importance of maintaining railroad operations, the railway
companies argued that competition “simply leads in railroad

23
See In re Elec. Books Antitrust Litig., 2012 WL 1946759 (S.D.N.Y. May 15, 2012).
24
Id. at *11.
21
Complaint at ¶ 65, United States v. Apple, Inc., No. 12-cv-2826 (S.D.N.Y. filed Apr. 25
Id. at *5.
11, 2012).
26
Answer at 1, United States v. Apple, Inc., No. 12-cv-2826 (S.D.N.Y. filed May 22,
22
United States v. General Motors Corp., 384 U.S. 127 (1966). 2012).

Concurrences N° 3-2012 I Tendances 15 e-Books and the boundaries of antitrust

business to financial ruin and insolvency”27. The Court found 17. In short, the Sherman Act stands for the assumption

Ce document est protégé au titre du droit d'auteur par les conventions internationales en vigueur et le Code de la propriété intellectuelle du 1er juillet 1992. Toute utilisation non autorisée constitue une contrefaçon, délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende
(art. L. 335-2 CPI). L’utilisation personnelle est strictement autorisée dans les limites de l’article L. 122 5 CPI et des mesures techniques de protection pouvant accompagner ce document. This document is protected by copyright laws and international copyright treaties. Non-authorised use of this document
constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment and up to a € 300 000 fine (Art. L. 335-2 Code de la Propriété Intellectuelle). Personal use of this document is authorised within the limits of Art. L 122-5 Code de la Propriété Intellectuelle and DRM protection.
this argument to be “greatly exaggerated,” and concluded that competition confers societal benefits, and arguments
that competition, not agreements among competitors, would that competition itself is harmful cannot prevail.
lead to reasonable rates28. One year later, in United States v.
Joint Traffic Assoc., 171 U.S. 505 (1898), on highly similar
facts, the Supreme Court expanded upon this point: “[t] 2. Combating Amazon’s “monopoly”
he natural, direct and immediate effect of competition is,
however, to lower rates, and to thereby increase the demand 18. Apple and the publisher defendants also argue that their
for commodities, the supplying of which increases commerce, concerted behavior was a reasonable way to combat Amazon’s
and an agreement, whose first and direct effect is to prevent “monopoly” in the retail market for eBooks34. Even if this
this play of competition, restraints instead of promoting were a defense, which it is not35, the argument seems unlikely
trade and commerce”29. to succeed as a factual matter. The agency agreements, each
of which included an MFN clause for Apple, did not just
14. The Supreme Court emphasized the same points affect Amazon’s ability to charge low prices. They affected
decades later in National Society of Professional Engineers the ability of anyone to undercut Apple. The upshot has been
v. United States, 435 U.S. 679 (1978). In this case, the that other retailers, such as Google36, cannot expand their
defendant society created a canon of ethics that prohibited penetration of the eBook marketplace through aggressive
its members from submitting competitive bids to provide price cutting. The MFN clause, the mechanism by which
engineering services30. Appealing to the public good, as the the alleged conspirators were able to enforce higher eBook
railway companies had before, the defendant society claimed prices, effectively limited discounting by all eBook retailers,
that such a rule was necessary to promote public safety, as price not only Amazon. Because the MFN required publishers to
competition would lead to “deceptively low bids” and poor guarantee to lower Apple’s retail prices to match the lowest
work quality31. The Court refused to entertain an argument price offered by any eBook retailer for a given title, Apple has
that competition is problematic: “the Rule of Reason does not been able to evade price competition.
support a defense based on the assumption that competition
itself is unreasonable”32. 19. While the MFN clause gave Apple the ability to
blunt Amazon’s pricing advantage, it did nothing to spur
15. Not only did the Supreme Court reject the notion that competition from other retailers. Apple argues that the
competition would lead to destructive results in the absence MFN provided it with necessary protection upon its entry37.
of an agreement among competitors; it also recognized that However, Apple possesses a significant market presence in
increased output and lower prices are two sides of the same the sale of mobile devices, which provides a solid platform
coin. Since the 1890s, the Court has found counterintuitive for the sale of eBooks, and other electronic media, such as
the argument that competition may result in the reduction music and films through its iTunes media player program.
of output because of the exit of suppliers from the market. Not only do these advantages offer protection to Apple, but
Thus, it seems doubtful that Apple and the defendant publishers they also make it difficult for other eBook retailers to compete
can argue that competition, left to its own devices, would have successfully against Apple if they cannot compete on price.
had the effect of reducing market output. Competition creates a The MFN clause serves only to solidify this competitive edge.
downward effect on pricing, which generally results in increased
demand and output. Even if competition proved ruinous for 20. Lastly, the contracts between Apple and the defendant
some publishers, there is no indication that market output for publishers guaranteed a sales commission of 30% to Apple38.
eBooks would suffer overall. The idea that authors in the While market competition typically involves undercutting
aggregate will stop (or slow down) writing if books are at $9.99 in prices between rivals in order to gain market share, the
rather than $12.99 seems both implausible and unprovable.
34
Apple has already taken this approach. See Answer at ¶ 60, United States v. Apple,
16. It can be argued with equal vigor that a sales model Inc., No. 12-cv-2826 (S.D.N.Y. filed May 22, 2012) (“Without Apple’s entry, eBook
distribution would essentially be ceded to a single distributor (Amazon), who would then
that facilities lower prices and increased demand leads to the possess virtually unlimited power in the eBook business.”).
dissemination of more authors’ works. At lower prices, more 35
See United States v. Philadelphia Nat’l Bank, 374 U.S. 321, 370-71 (1963).
books will be sold. There is simply no support for the idea 36
In comments filed in June 2012, Barnes & Noble objected to provisions in the proposed
that higher revenues for publishers and eBook resellers are settlement that would preclude the settling publishers from entering into most types of
necessary to support market for eBooks. As with the Supreme agency agreements for two years. Comments of Barnes & Noble, Inc., United States
v. Apple, Inc., No. 12-cv-2826 (S.D.N.Y. filed June 7, 2012); see Proposed Final
Court’s railway cases at the turn of the Twentieth Century, Judgment, United States v. Apple, Inc., No. 12-cv-2826 (S.D.N.Y. filed Apr. 11,
agreements among competitors are not necessary for setting 2012). Typically, remedies in antitrust cases will include similar types of “fencing in”
provisions. See ABA Section of Antitrust Law, Antitrust Law Developments
reasonable rates because competition accomplishes this goal33. 670-71, 718 (7th ed. 2012). This particular remedy, however, affects the interests of third
parties, such as Barnes & Noble, and that may make a difference. Still, it is difficult to see
27
Trans-Missouri Freight, 166 U.S. at 330. how the effects of the violation might be undone without this type of relief. It may also
28
Id. at 338-39. be relevant that Barnes & Noble is seeking to preserve a type of agreement that has led to
higher prices for eBooks.
29
Joint Traffic, 171 U.S. at 577.
Answer at ¶ 67, United States v. Apple, Inc., No. 12-cv-2826 (S.D.N.Y. filed May 22,
37
30
Nat’l Soc’y of Prof’l Eng’rs, 435 U.S. at 684. 2012).
31
Id. at 685. 38
As one of Apple’s defenders points out, such an arrangement solves the traditional vertical
incentive conflict between publishers and booksellers. See Posting by Josh Wright to Truth
32
Id. at 696.
on the Market, http://truthonthemarket.com/2012/03/15/the-apple-eBook-kerfuffle-
33
See Trans-Missouri Freight Ass’n, 166 U.S. at 339. meets-alfred-marshalls-principles-of-economics/ (Mar. 15, 2012).

Concurrences N° 3-2012 I Tendances 16 e-Books and the boundaries of antitrust

alleged conspiracy enables Apple to gain market share while

IV. Conclusion
21. Faced with evidence of meetings of directly competitive
book publishers, followed by uniform conversion to an
agency model, uniform and interlocking MFNs with Apple,
and an increase in the price of eBooks of some 30% or more,
it seems tough to say that the DOJ has no case. Given what is
already in the public domain through the quotes from Steve
Jobs and Rupert Murdoch, and allegations of meetings
among the publishers in fancy restaurants, there seems to be
at least a plausible argument of actual collusion. The case
has to be proven of course, but to dismiss it out of hand as
misguided, as some commentators have done, seems quite
wrong. n

Concurrences N° 3-2012 I Tendances 17 e-Books and the boundaries of antitrust

e-Books and the boundaries of Antitrust

The US e-Books case against Apple:

William Rinehart
Director of Operations at the International Center for Law & Economics

I. Introduction well have benefited consumers. While that may still open
the companies up for legal liability, it is far from clear that
1. In a lawsuit filed against Apple and five of the largest it should.
book publishers (three of which have settled)39, the US
Department of Justice alleges that the companies conspired
to raise prices in the eBooks market in violation of Section
1 of the Sherman Act. If proven true, the allegations could
II. Apple versus Amazon
trigger per se liability, and, even if the conduct serves 4. Apple – decidedly a hardware company – entered the
consumer interests, it may be penalized. But the law is ebook market as a device maker eager to attract consumers
necessarily imperfect, and especially in antitrust’s forward- to its expensive iPad tablets by offering appealing media
looking world of speculative economic harms, illegal does content. In this it is the antithesis of Amazon, a general
not necessarily mean undesirable. retailer that naturally moved into retailing digital content,
and began selling hardware (Kindle readers) only as a way of
2. In this article we assess the likely competitive effects of the getting consumers to embrace ebooks.
alleged conduct, and tell the possible procompetitive story
behind the allegations. Along the way we also offer some 5. The standard Kindle is essentially a one-trick pony
assessment of the legal claims, in particular the claims aimed (the latest Kindle Fire notwithstanding), and its focus is on
at the Most Favored Nation clause that Apple and each of ebooks. By contrast, the Apple iPad and, to a lesser degree,
the publishers adopted as part of their agreements. But our the Apple iPhone, is a multi-use platform, offering Internet
primary goal is to describe the market dynamics that form browsing, word processing, music, apps, and other products,
the backdrop to the case and assess the likely competitive of which books accounted – and still account – for a trivial
effects of the deals at issue – not (necessarily) their legality. percentage of revenue. Importantly, unlike Amazon, Apple
has many options for promoting adoption of its platform;
3. The aim of any sensible competition policy is to as Apple’s Answer to the DOJ’s Complaint notes, “Apple did
maximize consumer welfare. While that often means antitrust not believe it was necessary to sell eBooks for the iPad to
regulators should focus on lower prices, the situation is more be successful”41. Without denigrating Amazon’s offerings,
complicated for markets for new products, where technologies Amazon, by contrast, competes largely on the basis of its
for distribution and consumption are evolving rapidly along content, and its devices sell only as long as the content is
with business models. By shifting from a wholesale pricing attractive and attractively priced.
model to the “agency” pricing model at issue in the case,
Apple and the publishers may or may not have raised ebook 6. In essence, Apple’s iPad is a platform; Amazon’s Kindle is
prices in the short run (as we discuss below and contrary to a book merchant wrapped up in a cool device. The difference
some claims, the short-term price effect is unclear, at worst). between a merchant and a platform is in the degree of control
But this should not end the analysis. Their chosen courses an intermediary exerts over pricing and other terms of sale,
of action also resulted in more variability in pricing, and and the extent to which it bears risk. The more control, the
facilitated Apple’s entry into the market in the first place40. more merchant-like; the less control, the more platform-
This, in turn, has increased ebook retail competition overall like (Thus the Gap is a merchant; eBay is a platform)42.
and promoted innovation among ebook readers, while also Background economic conditions determine which model, or
increasing funding for ebook content creators. Judged on where on the continuum between them, is more efficient for
the basis of effects, even if concerted, their conduct may
41
Apple Inc.’s Answer at 4, United States v. Apple, Inc., No. 12-cv-2826 (S.D.N.Y. filed
39
Complaint, United States v. Apple, Inc., No. 12-cv-2826 (S.D.N.Y. filed Apr. 11, May 22, 2012).
2012).
42
See A. Hagiu, “Merchant or Two-Sided Platform”, 6 Review of Network Economics
40
See Apple Inc.’s Answer at 5, United States v. Apple, Inc., No. 12-cv-2826 (S.D.N.Y. 115,115 (2007) (“The main difference between [merchants] and two-sided platforms is
filed May 22, 2012) (“Apple admits that absent the agency agreements it would not have that pure merchants . . . take full control over their sale to consumers. By contrast, pure
entered eBook distribution, given the circumstances of the business as it existed prior to two-sided platforms leave that control entirely to sellers and simply determine buyer and
Apple’s entry.”) seller affiliation with a common marketplace.”).

Concurrences N° 3-2012 I Tendances 18 e-Books and the boundaries of antitrust

a given intermediary or market. As these conditions change, 12. As it happens, publishers seem to prefer the agency

Ce document est protégé au titre du droit d'auteur par les conventions internationales en vigueur et le Code de la propriété intellectuelle du 1er juillet 1992. Toute utilisation non autorisée constitue une contrefaçon, délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende
(art. L. 335-2 CPI). L’utilisation personnelle est strictement autorisée dans les limites de l’article L. 122 5 CPI et des mesures techniques de protection pouvant accompagner ce document. This document is protected by copyright laws and international copyright treaties. Non-authorised use of this document
constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment and up to a € 300 000 fine (Art. L. 335-2 Code de la Propriété Intellectuelle). Personal use of this document is authorised within the limits of Art. L 122-5 Code de la Propriété Intellectuelle and DRM protection.
the optimal degree of control may change, as well. At the model, preferring to keep control over prices and marketing
same time, suppliers or intermediaries may choose to assert (but also to retain the full risk of poor sales) in this medium
or deny control in response to changing economic conditions rather than abdicating those decisions (as in the brick-
– and this choice may not be optimal. and-mortar model) to a retailer like Amazon. It is actually
common knowledge in the publishing industry that the
7. What this means is that Apple, unlike Amazon, is far agency model tends to net publishers less revenue, but what
less interested in controlling content prices for books and other they gain is the power of resale price maintenance – ensuring
content; it hardly needs to control that lever to effectively market that retailers who sell their products do not inefficiently
its platform, and it can easily rely on content providers’ self sacrifice promotional efforts to publishers’ detriment.
interest to ensure that enough content flows through its devices.
Apple is content to act as a typical two-sided platform would, 13. The wholesale model plus RPM is largely equivalent
acting as a conduit for others’ content, which the content owner to the agency model, but, of course, dealing with a seller
controls. Amazon surely has “platform” status in its sights, like Apple, which is largely unconcerned about profits
but reliant as it is on ebooks, and nascent as that market is, it from ebook sales (ebook sales generate only about .0005%
is not quite ready to act like a “pure” platform. of Apple’s total revenues) suggests that the problems of
inefficient promotion and pricing may be substantially more
8. As a further indication of this distinction, consider acute. Under a standard model, Apple has little to gain
that, while engaging in the alleged anticompetitive behavior from promotional activities devoted to the sale of ebooks
in this case, Apple has also permitted Amazon to offer its beyond that sufficient to convey the basic information at the
own Kindle app on the iPad and iPhone platforms and sell point of sale for its hardware that such content is available.
books to iPad owners independent of Apple’s iBooks store. Perhaps most notably, in the ebooks context, this suggests a
Rather than trying to stifle competition, Apple has promoted diminished incentive on Apple’s part optimally to invest in
it, not out of the goodness of its heart but out of its focus algorithms and site design innovations to effectively match
on content. Amazon’s Kindle app, while directly competing readers’ preferences with recommended books.
with Apple’s own ebook offerings, nevertheless offers content
for Apple’s devices, and this consideration clearly outweighs 14. Publishers thus have an incentive to enter into distribution
Apple’s alleged desire to use anticompetitive means to expand deals – like the agency model – to compensate Apple or other
its share of ebook profits. retailers for more extensive and broader promotion of their
books, including promotion of their content to existing
iPad owners, not merely prospective device purchasers.
III. The wholesale and agency models By offering Apple a retail margin sufficient to cover the costs
of additional promotional efforts, publishers provide Apple
9. Books have traditionally been sold using the standard an economic stake in such promotional efforts and facilitate
wholesale model. Under this model, publishers sell books to more extensive promotion43.
retailers at the wholesale price, but mark each cover with the
Recommended Retail Price (RRP), which is usually double
the wholesale amount. Retailers, in turn, are free to sell the IV. Prices under the models
books at whatever price they choose, but because the RRP
is often (at least initially) set as the retail price, it becomes 15. Year over year ebook consumption has been increasing
the de facto cost to consumers. at a frenzied clip. From 2008 to 2010, revenues and sales for
the publishing industry as a whole grew despite the down
10. When publishers first began selling ebooks to Amazon, economy. Even though they have been around for decades,
they used the standard wholesale model. However, to ebooks really took off in these two years, driven by yearly
encourage the purchase of its Kindle devices, Amazon increases of over 1000 percent. An even greater leap is
began to sell new releases and best selling ebooks at $9.99, expected for the coming years.
well below the wholesale price, which allowed it to capture
upwards of 90 percent of the market. 16. Currently Apple and Amazon compete on a nearly level
footing, and prices for most bestsellers are the same for each
11. The agency model relies on a different structure, one retailer. But Apple is hardly a behemoth in this market.
which takes advantages of electronic delivery methods to When Apple entered the digital book market in January
build in previously unavailable control and differentiation 2010, Amazon had nearly 90 percent of the market. With
in pricing by publishers. Here, retailers (platforms) become Apple’s entry, “Amazon now has about 65 percent of the
agents through which consumers purchase ebooks. Prices ebook market, while Barnes & Noble has 20 percent and
are set directly by the publisher, and the agent gets a flat Apple has 10 percent at most”44. This same article avers that
percentage of the revenues. Apple pioneered this method of “[a]s the market shifted, prices have risen”.
selling ebooks, but the arrangement was largely an adaptation
of its standard arrangement for the pricing and sale of music 43
See B. Klein, “Competitive Resale Price Maintenance in the Absence of Free Riding”, 76
Antitrust L. J. 431 (2009).
and apps through its iTunes store. eBook publishers, as is
44
D. Bartz, “E-books settlement talks advancing: sources,” Reuters, March 30, 2012,
the case for app developers and music distributors, split the available at http://www.reuters.com/article/2012/03/30/us-apple-publishers-ebooks-
revenues – 70% to the publisher and 30% to Apple. idUSBRE82T19620120330.

Concurrences N° 3-2012 I Tendances 19 e-Books and the boundaries of antitrust

17. But increased prices, the logical consequence of the 21. There is nothing, that we know of, in the MFNs or

18. Downward price movement from a move to the agency 22. That said, it may well have been everyone’s hope that, as
model is, in fact, consistent with economic analysis: Because the DOJ alleges, the MFNs would operate like price floors
the wholesale model imposes added costs through double instead of price ceilings, ensuring higher prices for publishers.
marginalization, an effect eliminated by the agency model, a But hoping for higher prices is not an antitrust offense, and
move to the latter can readily produce lower prices. At least it’s not even clear that, viewed more broadly in terms of the
one independent ebook distributor has corroborated this evolution of the ebook and e-reader markets, slightly higher
prediction, crunching the numbers on Apple sales of the prices in the short run would be bad for consumers.
books it distributes and finding that, with all of the free
books taken out, average prices have dropped 25% from
$4.55 in October 2010 to $3.41 in March 201247. VI. The legal standard
23. To the extent that book publishers don’t necessarily know
V. The most favored nation clauses what’s really in their best interest, the DOJ is even more
constrained in judging the benefits (or costs) for consumers at
19. Having given up control over prices, Apple has an large from this scheme. There is a solid procompetitive story
important remaining problem: no guarantee of being able to here, and the DOJ will have to contend with Leegin48, which
offer attractive content at an attractive price if it is forced to overturned the 100 year-old rule established in Dr. Miles
try to sell ebooks at a high price while its competitors can that made vertical price fixing per se illegal. Now, vertical
undercut it. And so, as is common in this sort of distribution price restraints must be judged by the rule of reason, “which
agreement, Apple obtained “Most Favored Nation” (MFN) requires the fact-finder to weigh all of the circumstances,
clauses from publishers to ensure that if they are permitting including specific information about the relevant business
other retailers to sell their books at a lower price, Apple will and the restraint’s history, nature and effect . . . [and] [w]
at least be able to do so, as well. The contracts at issue in the hether the businesses involved have market power”49.
case specify maximum resale prices for content and ensure It allows the court to distinguish between “restraints with
Apple that if a publisher permits, say, Amazon to sell the anticompetitive effects that are harmful to the consumer and
same content at a lower price, it will likewise offer the content those with procompetitive effects that are in the consumer’s
via Apple’s iBooks store for the same price. best interest”50.

20. The DOJ is fighting a war against MFNs, which is 24. These considerations are potentially quite important
a story for another day, and it seems clear from the terms here because there is no allegation that the publishers and
of the settlement with the three settling publishers that, Apple agreed on price. Rather, the allegation is that they
indeed, MFNs are a big part of the target here. But there agreed to adopt a particular business model that had the
is nothing inherently problematic about MFNs. Here, and effect of coordinating prices (one that, we would point
important among these, they facilitate entry by offering some out, probably resulted in greater variation in price, rather
protection for an entrant’s up-front investment in challenging than less, compared to Amazon’s traditional $9.99-for-all
an incumbent, and offer some protection against subsequent pricing scheme). If the DOJ can convince a court that this
entrants undercutting this price and rendering inefficient nevertheless amounts to a naked price-fixing agreement
up-front investments. In this sense MFNs are essentially among publishers, with Apple operating as the hub, then the
an important way of inducing retailers like Apple to sign case will be evaluated under the per se standard. But while
on to an agency or RPM (no control) model by offering antitrust law is suspicious of collective action among rivals,
some protection against publishers striking a deal with a this change in business model does not alone connote
competitor that leaves Apple forced to price its ebooks out coordinate on prices: Each individual publisher can set its
of the market. own price, and it’s not clear that the DOJ’s evidence points to
any agreement with respect to actual pricing.

45
Yankee Group, 2011 e-Book Forecast, January 12, 2011, available at http://www.
yankeegroup.com/ResearchDocument.do?id=55383.
46
See, e.g., eBook Market View Blog, http://ebmv.blogspot.com/.
48
Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877 (2007).
47
M. Coker, “Does Agency Pricing Lead to Higher Book Prices?,”Smashwords Blog, March
49
Id.
28, 2012, available at http://blog.smashwords.com/2012/03/does-agency-pricing-lead-
to-higher-book.html. 50
Id.

Concurrences N° 3-2012 I Tendances 20 e-Books and the boundaries of antitrust

25. Nevertheless, as Joshua Wright has noted:

VII. Conclusion
26. The background market dynamics in the US ebook
market suggest that the alleged conduct between the
publishers and Apple may not be particularly troubling. In
fact, as we have discussed, there are significant procompetitive
justifications for the firms’ conduct. While these may not save
the firms from application of per se liability under Section 1
of the Sherman Act, it is worth considering these factors in
assessing the appropriateness of the case.

27. The relevant antitrust question is not “which business

model is better?”; no one really knows what the right model
is, least of all antitrust regulators52. Like all legal rules,
antitrust should be judged by the structure of incentives it
creates and the consequences that come about in response to
these incentives. In rapidly evolving consumer markets where
the consumer welfare effects of a practice are unknown, we
should tend toward restraint, lest our regulatory actions of
today deter the innovative models of tomorrow. n

51
J. D. Wright,“Apple Responds to the DOJ e-Books Complaint,”Truth on the Market Blog,
May 28, 2012, available at http://truthonthemarket.com/2012/05/28/apple-responds-to-
the-doj-e-books-complaint/.
52
A point repeatedly reinforced by the US Supreme Court’s generally “error-cost”approach
to antitrust enforcement. See, e.g., Brooke Group Ltd. v. Brown & Williamson
Tobacco Corp., 509 U.S. 209 (1993), Verizon Comm’s, Inc. v. Law Offices of
Curtis V. Trinko, LLP, 540 U.S. 398 (2004), Credit Suisse Sec. (USA) LLC
v. Billing, 127 S. Ct. 2383 (2007), and Pac. Bell Tel. Co. v. linkLine Commc’ns,
Inc., 129 S. Ct. 1109 (2009).

Concurrences N° 3-2012 I Tendances 21 e-Books and the boundaries of antitrust

e-Books and the boundaries of Antitrust

Le livre numérique, entre prix unique,

1. La loi n° 2011-590 du 26 mai 2011 relative au prix du 5. Le livre numérique est, en revanche, singulier55 quant
livre numérique pose l’obligation, pour toute personne à ses modalités d’accès (il peut par exemple être diffusé en
établie en France qui édite un livre numérique dans le but flux – donc lu “en streaming” – ou téléchargé) et d’usage.
de sa diffusion commerciale en France, de fixer un prix de À cet égard, on soulignera qu’il peut, par exemple, être mis à
vente au public pour tout type d’offre à l’unité ou groupée. disposition pour une durée limitée, ce qui apparente dans ce
Ce prix peut différer en fonction du contenu de l’offre et de cas sa mise à disposition plus à une location qu’à une vente.
ses modalités d’accès ou d’usage (article 2). Le prix de vente Mais le livre numérique peut également, ou non, selon ses
ainsi fixé par l’éditeur s’impose aux personnes proposant des modalités de commercialisation, être imprimé ou “copié” par
offres de livres numériques aux acheteurs situés en France son acquéreur, ou encore transféré sur un autre support de
(article 3). Autrement dit, si la fixation d’un prix unique lecture (une autre “liseuse” par exemple).
s’impose à l’éditeur, le respect de ce prix unique s’impose
de son côté aux distributeurs, détaillants, quel que soit au
6. L’initiative de cette loi a suscité des réserves certaines,
demeurant leur lieu d’établissement, et cela sous peine d’une
tant de la part de l’Autorité de la concurrence en France56,
amende prévue pour les contraventions de 3° classe53.
consultée pour avis, que de la Commission européenne qui
a formulé deux avis circonstanciés et des observations sur le
2. Il s’agit donc in fine d’imposer, sur le marché des acheteurs
projet de texte57.
de livres numérique situés en France, la fixation (par l’éditeur
établi en France) d’un prix unique du livre numérique par
type d’offre et compte tenu des modalités d’accès et d’usage. 7. Nous ne reviendrons pas sur le contenu de ces avis,
auxquels nous renvoyons, ni sur le bien-fondé des motivations
3. La définition du livre numérique est donnée à l’article 1 du législateur français58. Nous nous contenterons pour notre
de la loi qui dispose qu’elle “… s’applique au livre numérique part de souligner le lien entre cette loi et la législation sur
lorsqu’il est une œuvre de l’esprit créée par un ou plusieurs le droit d’auteur, qui nous semble justifier, pour une large
auteurs et qu’il est à la fois commercialisé sous sa forme
55
Cette singularité est d’ailleurs prise en compte par le décret du 10 novembre 2011 qui
numérique et publié sous forme imprimée ou qu’il est, par dispose en son article 2 que“Au sens du deuxième alinéa de l’article 2 de la loi du
son contenu et sa composition, susceptible d’être imprimé, 26 mai 2011 susvisée :
(…)
à l’exception des éléments accessoires propres à l’édition – les modalités d’accès au livre numérique s’entendent des conditions
numérique”. Cette définition est précisée à l’article 1 du décret dans lesquelles un livre numérique est mis à disposition sur un support
n° 2011-1499 du 10 novembre 201154. d’enregistrement amovible ou sur un réseau de communication au public en
ligne, notamment par téléchargement ou diffusion en flux (“streaming”) ;
– les modalités d’usage du livre numérique se rapportent notamment au
4. Au regard de cette définition, le livre numérique, mis à caractère privé ou collectif de cet usage, à la durée de mise à disposition du
part son support et quelques “éléments accessoires propres à livre numérique, à la faculté d’impression, de copie et de transfert du livre
numérique sur divers supports de lecture”.
l’édition numérique”, ne présente pas vraiment de spécificité
56
Avis n° 09-A-56 du 18 décembre 2009 relatif à une demande d’avis du ministre de la
par rapport au livre papier, à tout le moins en tant qu’objet Culture et de la Communication portant sur le livre numérique.
de lecture caractérisé par son contenu et sa composition.
57
Avis circonstanciés de la Commission européenne du 13 décembre 2010, n° C (2010) 9338
et du 31 janvier 2011, n° C (2011) 653
58
Le message de notification des autorités françaises à la Commission précise que “Cette
mesure vise à protéger le marché d’une prise de son contrôle par des
opérateurs extérieurs à l’économie de la création et dont l’objectif serait
la commercialisation d’autres produits ou services, reléguant les oeuvres
53
Fixée par l’article 1 du décret n° 2012-146 du 30 janvier 2012, laquelle contravention
culturelles au rang de produit d’appel. Elle vise en outre à permettre
sanctionne aussi le fait pour l’éditeur de ne pas avoir fixé ce prix unique.
d’imposer les mêmes conditions à tous les acteurs du secteur, de favoriser la
54
Qui dispose : “Les éléments accessoires propres à l’édition numérique diversité de la diffusion et, partant, la diversité de l’offre, dans le respect des
mentionnés au premier alinéa de l’article 1er de la loi du 26 mai 2011 susvisée droits d’auteur. Disposition ad hoc, elle a enfin l’avantage de ne pas remettre
s’entendent des variations typographiques et de composition, des modalités en cause les équilibres de la loi du 10 août 1981”. La ratio legis ressort aussi
d’accès aux illustrations et au texte telles que le moteur de recherche associé, de l’article 8 de la loi selon lequel “…l’application d’un prix fixe au commerce du
les modalités de défilement ou de feuilletage des éléments contenus, ainsi que livre numérique profite au lecteur en suscitant le développement d’une offre
des ajouts de textes ou de données relevant de genres différents, notamment légale abondante, diversifiée et attractive, et favorise une rémunération juste
sons, musiques, images animées ou fixes, limités en nombre et en importance, et équitable de la création et des auteurs, permettant d’atteindre l’objectif de
complémentaires du livre et destinés à en faciliter la compréhension”. diversité culturelle poursuivi par la présente loi”.

Concurrences N° 3-2012 I Tendances 22 e-Books and the boundaries of antitrust

part, cette législation imposant un prix unique. Puis nous culturelle pour justifier ces dispositions propres au secteur

Ce document est protégé au titre du droit d'auteur par les conventions internationales en vigueur et le Code de la propriété intellectuelle du 1er juillet 1992. Toute utilisation non autorisée constitue une contrefaçon, délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende
(art. L. 335-2 CPI). L’utilisation personnelle est strictement autorisée dans les limites de l’article L. 122 5 CPI et des mesures techniques de protection pouvant accompagner ce document. This document is protected by copyright laws and international copyright treaties. Non-authorised use of this document
constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment and up to a € 300 000 fine (Art. L. 335-2 Code de la Propriété Intellectuelle). Personal use of this document is authorised within the limits of Art. L 122-5 Code de la Propriété Intellectuelle and DRM protection.
aborderons le rôle que pourrait jouer le droit de la des biens culturels. Exception non pas à la culture, mais
concurrence à propos du livre numérique, malgré l’existence aux règles du marché habituelles, à des fins de diversité de
d’un dispositif légal reposant d’un côté sur une législation la création culturelle. Autrement dit, chaque secteur de la
imposant un prix unique et d’un autre côté sur le droit création culturelle peut connaître de mesures d’exception
d’auteur. (culturelle) destinées à le soutenir, en dépit du seul libre jeu
du marché et de la concurrence.
8. S’agissant du bien fondé d’une intervention législative
de ce type, il faut toujours garder présent à l’esprit que le 12. À l’égard du livre, il n’y a pas de raisons, a priori,
couple auteur-éditeur est au fondement du marché du livre. pour que le passage au format (ou support) numérique
La loi du 26 mai 2011 semble construite autour et sur la base change la donne relativement à l’existence d’un prix unique
de ce couple. Notamment, la rémunération de l’auteur, en imposé, alors même que le principe reste la rémunération
contrepartie de la cession de ses droits d’auteurs, lui est versée proportionnelle versée par l’éditeur, laquelle doit même être
par l’éditeur. Autrement dit, en application du dispositif “juste et équitable”.
légal figurant dans le code de la propriété intellectuelle (CPI),
il est logique que l’éditeur puisse déterminer le prix de vente 13. Pour autant, le livre numérique n’échappe pas à
au public : c’est sur la base de celui-ci que l’auteur recevra, certaines interrogations sur le caractère propice d’un modèle
en principe59, une rémunération proportionnelle. De ce point économique qui repose pour partie sur un dispositif légal
de vue, un livre n’est pas une marchandise comme les autres ; de prix unique dérogatoire au principe de la liberté des prix
celui qui l’a créé, l’auteur, est associé directement au produit et pour une autre partie sur l’exercice de droits d’auteur.
de ses ventes du fait d’un principe d’ordre public figurant Car, comme nous allons le voir, en matière de livre numérique,
dans le CPI : la rémunération proportionnelle (article L131‑4 il n’y a pas que la loi relative au prix unique qui pourrait
du CPI). Et depuis la loi du 26 mai 2011, cet ordre public susciter des pratiques, le cas échéant, anticoncurrentielles :
de protection de l’auteur s’est enrichi d’un alinéa 2 ajouté à il y a aussi l’exercice de droits d’auteur.
l’article 132-5 du CPI qui dispose désormais que “le contrat
d’édition garantit aux auteurs, lors de la commercialisation 14. En amont de tout livre numérique (lorsqu’il s’agit d’une
ou de la diffusion d’un livre numérique, que la rémunération œuvre non tombée dans le domaine public), commercialisé
résultant de l’exploitation de ce livre est juste et équitable. sous un prix unique, se trouvent des droits d’auteur cédés
L’éditeur rend compte à l’auteur du calcul de cette rémunération généralement à l’éditeur. Ce dernier, lorsqu’il donne accès à
de façon explicite et transparente”. distance au livre numérique (par l’offre de téléchargement,
par diffusion en flux, etc.), ne fait en réalité qu’exercer
9. En définitive, s’agissant d’œuvres protégées, il est possible des droits d’auteur. En cela, par sa dématérialisation et sa
d’affirmer qu’il existe une réelle complémentarité entre numérisation, le livre numérique perd la spécificité du livre
la législation sur le prix unique du livre numérique et celle papier entendu juridiquement comme un objet matériel
relative au droit d’auteur60 : ce prix unique n’est autre, en faisant l’objet d’une vente du support62.
principe, que l’assiette de la rémunération de l’auteur qui
doit lui être versée par l’éditeur. De ce point de vue, la loi du 15. Les éditeurs peuvent ainsi délivrer une autorisation
26 mai 2011 trouve une réelle justification61. d’accès au fichier numérique limitée dans le temps (couplée
par exemple avec une interdiction/impossibilité de copier le
10. On objectera cependant, à raison, que d’autres secteurs texte numérisé et de l’imprimer)63.
de la création (“produits culturels”) ne connaissent pas d’une
législation équivalente à celle relative au prix unique du livre. 16. Autrement dit, par exemple des bibliothèques (ou tout
Il en va ainsi, par exemple, des films ou des enregistrements autre intermédiaire qui donne un accès au public à des
musicaux, tous a priori protégés pourtant par le droit d’auteur livres numériques) qui se constitueraient des fonds de livres
et soumis au principe de la rémunération proportionnelle. numériques accessibles par diffusion en flux (streaming)
pourraient un jour se voir “privées” de l’accès à leurs fonds
11. Mais on ne doit pas oublier que la diffusion de musique par le détenteur des droits d’auteur dans la mesure où la mise
par les radios ou de films par les chaînes de télévision est à disposition du public sous forme numérique d’un texte est
enserrée dans des quotas de diffusion d’œuvres d’expression un acte d’exploitation qui doit être autorisé (au titre du droit
française, et que les films cinématographiques doivent d’auteur) par les auteurs ou leurs ayants droit.
notamment obéir à la fameuse chronologie des médias (sans
oublier les obligations d’investissement dans la production 17. L’existence de ces droits d’auteur, tout comme la loi
qui pèsent lourdement sur les chaînes). On parle d’exception relative au prix unique du livre numérique, auront-ils une
influence sur le traitement par les autorités de concurrence
59
En principe car l’article L. 131-5 du CPI prévoit la possibilité, dans certains cas, d’une d’éventuelles pratiques anticoncurrentielles ?
rémunération forfaitaire pour l’auteur. On précisera que cette dernière est censée être
généralement moins avantageuse pour l’auteur que la rémunération proportionnelle.
Ce lien se trouve d’ailleurs dans l’article 1er de la loi qui impose que le livre numérique
60
soumis à la loi soit une “œuvre de l’esprit”, mais aussi à l’article 6 qui a modifié
l’article L. 132-5 du CPI. 62
Laquelle vente est soumise à épuisement du droit d’auteur : article L. 122-3-1 du CPI.
61
Cependant, sous cet angle (la rémunération de l’auteur, le droit d’auteur), la logique de la 63
Sans parler du jeu d’éventuelles mesures techniques de protection qui empêcheraient, le cas
loi sur le prix unique se justifie a priori moins (sinon plus du tout) s’agissant des œuvres échéant, le public de bénéficier de certaines exceptions ou pourraient poser des problèmes
tombées dans le domaine public… Fallait-il, pour ces dernières, imposer le prix unique ? d’interopérabilité. Ces problèmes relèvent des missions et pouvoirs de l’HADOPI
Peut-être dans une logique économique, mais pas, semble t-il, dans une logique juridique. – articles L. 331-31 et s. du CPI.

Concurrences N° 3-2012 I Tendances 23 e-Books and the boundaries of antitrust

En effet, le marché du livre numérique pourra susciter de du CPI qui instituent des droits de propriété intellectuelle)

Ce document est protégé au titre du droit d'auteur par les conventions internationales en vigueur et le Code de la propriété intellectuelle du 1er juillet 1992. Toute utilisation non autorisée constitue une contrefaçon, délit pénalement sanctionné jusqu'à 3 ans d'emprisonnement et 300 000 € d'amende
(art. L. 335-2 CPI). L’utilisation personnelle est strictement autorisée dans les limites de l’article L. 122 5 CPI et des mesures techniques de protection pouvant accompagner ce document. This document is protected by copyright laws and international copyright treaties. Non-authorised use of this document
constitutes a violation of the publisher's rights and may be punished by up to 3 years imprisonment and up to a € 300 000 fine (Art. L. 335-2 Code de la Propriété Intellectuelle). Personal use of this document is authorised within the limits of Art. L 122-5 Code de la Propriété Intellectuelle and DRM protection.
la part de ses acteurs des pratiques anticoncurrentielles : qui confèrent également un monopole légal à leur titulaire
ententes, voire abus de position dominante. sans pour autant que celui-ci échappe toujours à l’application
du droit de la concurrence.
18. Ainsi, outre les pratiques potentiellement anticoncurrentielles
de refus d’accès qui viennent d’être évoquées plus haut, on 23. Il est ainsi, ensuite, peu probable que les éditeurs puissent
pourrait imaginer que les éditeurs s’entendent entre eux et/ opposer dans tous les cas les droits d’auteur dont ils sont
ou avec les distributeurs sur la fixation du “prix unique”, ce titulaires pour échapper au grief d’entente, voire d’abus de
qui affecterait au moins la concurrence inter-marques entre position dominante. On sait en effet que, de longue date,
éditeurs. la jurisprudence de la Cour de justice de l’UE, relayée en
France par la pratique de l’Autorité de la concurrence, a posé
19. Un autre problème qui pourrait survenir est celui de une articulation entre propriété intellectuelle et droit de la
l’interopérabilité des fichiers numériques. Si un standard de concurrence. L’exercice d’un droit de propriété intellectuelle
fichier numérique (ou de technologie de lecture de fichiers par son titulaire est susceptible, dans certaines circonstances,
numériques) émergeait sur ce marché, celui qui “détiendrait” de constituer une pratique anticoncurrentielle, sans qu’il soit
ce standard pourrait être tenté d’en profiter pour asseoir toujours possible de justifier celle-ci par l’existence même du
sa situation concurrentielle en évinçant les concurrents droit de propriété intellectuelle. Peu importe à cet égard que
auxquels il refuserait l’accès à ce standard. On reconnait là la pratique en cause provienne de l’exercice contractuel d’un
par exemple des faits proches de ceux de l’affaire Apple c/ droit de propriété intellectuelle ou, plus en amont, d’un refus
Virgin Mega64. d’autorisation d’exploitation68 (même si, pour ces deux cas
les règles jurisprudentielles d’articulation entre droit de la
20. En réalité, le droit de la concurrence devrait, selon nous, concurrence et droits de propriété intellectuelle ne sont pas
pouvoir s’appliquer à ces pratiques et ainsi jouer un certain les mêmes). Ainsi, le droit de la concurrence pourra être un
rôle dans la régulation du marché du livre numérique. précieux instrument pour faire cesser et sanctionner, le cas
échéant, des pratiques anticoncurrentielles de titulaires de
21. En effet, il est peu probable tout d’abord que la loi du droits d’auteur sur le livre numérique.
26 mai 2011 permette d’échapper à l’application du droit de
la concurrence par exemple dans les cas évoqués plus haut 24. En conclusion, la prudence s’impose et il convient de
et cela, malgré l’article L. 420-4 I 1° du code de commerce, mesurer ce qu’impliquera le passage du livre au numérique,
qui dispose que : “Ne sont pas soumises aux dispositions des particulièrement quant aux pratiques des éditeurs, de ceux
articles L. 420-1 et L. 420-2 les pratiques : 1° Qui résultent de qui fabriquent les “liseuses”, mais aussi des distributeurs et
l’application d’un texte législatif ou d’un texte réglementaire pris diffuseurs de livres numériques, ou plus généralement des
pour son application”. En effet, outre le fait que la loi française intermédiaires ou prestataires du commerce électronique qui
suscite des doutes quant à sa conformité au droit de l’Union interviendront sur le marché du livre numérique…
européenne65, ce qui pourrait conduire le juge à l’écarter, le
bénéfice de la justification posée par l’article L. 420-4 I 1° du 25. On pourra certes objecter que la loi relative au prix unique
code de commerce est enserré dans certaines limites. Il faut du livre numérique ne permet pas d’empêcher certaines
ainsi, pour bénéficier de la justification, que l’entente ou pratiques. C’est vrai. Mais l’on rappellera seulement que
l’abus de domination résulte directement et nécessairement cette loi a pour champ d’application les livres numériques
du texte législatif ou réglementaire66. Il ne faut donc pas, par susceptibles d’être imprimés ou faisant l’objet, en parallèle,
exemple, que l’entente ajoute des restrictions à celles résultant d’une publication papier : l’un des objectifs poursuivis par
de l’intervention des pouvoirs publics. Or, par exemple, la loi le législateur est bien de ne pas démanteler le système de
du 26 mai 2011 ne limite pas la concurrence inter-marque prix unique sur lequel repose l’économie du livre papier.
entre éditeurs. De même, cette loi ne saurait justifier per se Autrement dit, en choisissant de ne pas prendre le risque de
certaines clauses figurant par exemple dans les contrats entre tuer économiquement dès maintenant le livre papier du fait
éditeurs et distributeurs, comme des clauses d’exclusivité. du livre numérique, on donne un choix au lecteur. Celui-ci
De manière générale, si les pratiques anticoncurrentielles ne pourra acheter la version papier ou la version électronique.
sont pas la conséquence inéluctable67 de la loi de 2011 et/ou Et l’on se donne du temps pour apprécier l’évolution (et les
de ses décrets d’application, l’article L. 420-4 I 1° du code de implications) de l’offre légale de livres numériques.
commerce ne pourra servir de justification à celles-ci.
26. Adopter une loi sur le prix unique du livre numérique en
22. De manière tout aussi générale, on ne voit pas en quoi la France, était finalement, de notre point de vue, la solution
loi du 26 mai 2011, qui institue un monopole légal (dans la la plus sage, et la moins mauvaise, en tout cas si l’on se situe
possibilité de fixer le prix) au profit de l’éditeur, devrait être du côté des créateurs, et de leurs partenaires que sont les
traitée différemment d’autres textes (comme les dispositions éditeurs, et peut-être même, du côté du public, c’est-à-dire
des lecteurs. Sachant que, du point de vue de l’application du
64
Cons. conc. déc. n° 04-D-54, 9 nov. 2004, BOCCRF 31 mars 2005, p. 188. Il s’agissait droit de la concurrence, cela ne change finalement, toujours
cependant en l’espèce de DRM. de notre point de vue, pas grand-chose.
Sur lesquelles cf. Avis circonstancié de la Commission européenne du 31 janvier 2011, précité.
65
68
Sur cette question, cf. notamment Conseil de la Concurrence, Rapport 2004, Etude
66
Cons. conc. déc. n° 03-D-03, 16 janv. 2003, Pratiques du barreau de Marseille en matière
thématique : “les droits de la propriété intellectuelle et le droit de la concurrence”, p. 111
d’assurance, BOCCRF 11 juin 2003, p. 323.
et s. Plus récemment, C. Maréchal, Concurrence et propriété intellectuelle, Préface
67
Sur cette condition, cf. Lamy Droit économique, 2011, n° 1167. de G. Bonet, IRPI, Le droit des affaires, vol. 32, 2009.

Concurrences N° 3-2012 I Tendances 24 e-Books and the boundaries of antitrust

e-Books and the boundaries of Antitrust

e-Books in the EU: Competition, pricing,

Audrey Oh*
Legal assistant, White & Case LLP

I. Introduction 3. This matter had originally been under investigation by the

United Kingdom’s Office of Fair Trading (“OFT”) following
1. On 6 December 2011, the European Commission a number of complaints from the public. In January 2011,
(“Commission”) opened a formal investigation into the the OFT began looking into whether pricing arrangements
European e-Book market to examine whether various put in place between certain publishers and retailers for the
e-Book publishers, possibly in conjunction with Apple, Inc., sale of e-Books breached UK competition rules70. The OFT,
had engaged in anticompetitive conduct to manipulate the however, announced late last year on 6 December 2011 (the
same day the Commission announced its decision to open
price of e-Books in the European Economic Area (“EEA”).
formal proceedings) its decision to close its investigation on
This paper will give background on the antitrust proceedings
the grounds of the OFT’s administrative priorities. Following
currently on-going in Europe, as parties to the investigation
discussions with the Commission, the OFT concluded that
recently proposed to settle the case with the Commission.
the Commission was “well placed to arrive at a comprehensive
Furthermore, to better understand the market conditions
resolution of this matter and will do so as a matter of
in which e-Books were (and are being) introduced in EU
priority”71. UK and EU regulators have been working in
Member States, this paper will provide a closer look into close cooperation, and will continue to do so as the case
the publishing industry’s traditional pricing practices and moves forward.
regulations in hopes of shedding some light into the complex
and conflicting nature of the relationship between national 4. According to the Commission, its investigation examines
publishing regulations and EU competition law. Finally, we (i) whether Apple and certain e-Book publishers have
explore various cultural factors influencing the reception engaged in illegal agreements or practices that would have
and adoption of e-Books in Europe, and conclude with the object or the effect of restricting competition in the
future projections and policy recommendations to ensure a EU or in the EEA, and (ii) the character and terms of the
strategic, pragmatic approach to a sector expanding rapidly agency agreements entered into by the five named publishers
on a global scale. and retailers for the sale of e-Books. The Commission
is concerned that these alleged practices may breach EU
competition rules that prohibit cartels and restrictive
II. The Commission’s investigation: business practices. In particular, the Commission suspects
that by shifting the power to determine the price of e-Books
Background and concerns from retailers to publishers, retailers have lost the power to
independently set prices, which could result in higher e-Book
2. The Commission’s investigation follows unannounced prices for consumers.
inspections conducted in March 2011 at the premises of
various e-Book publishing companies in several different 5. At the centre of the Commission’s investigation is
Member States, on the grounds that the concerned parties the “agency model”, a newer type of pricing strategy in
may have violated European Competition rules – in the e-Book market which allows the publisher to set the price
particular, Article 101 of the Treaty of the Functioning of of the e-Book, and then retailers, such as Apple, receive a
the European Union69. Parties to the proceedings include: 30% commission off of the retail price72. The Commission
Hachette Livre (France), Harper Collins (US), Simon &
Schuster (US), Penguin (UK), and Verlagsgruppe Georg von 70
The Competition Act 1998 prohibits agreements, practices and conduct that may have
a damaging effect on competition in the UK. The Chapter 1 prohibition covers anti-
Holzbrinck (Germany). competitive agreements and concerted practice that have the object or effect of preventing,
restricting or distorting competition in the UK or a part of it and which may affect trade
*
The authors would like to thank Katarzyna Pawlikowska for her research assistance. in the UK or a part of it.
The views presented here are their own and do not represent the view of the firm or of its 71
See OFT Statement of 6 December 2011: http://www.oft.gov.uk/OFTwork/competition-
clients. act-and-cartels/ca98/closure/e-books.
69
Article 101 of the TFEU, implemented by Council Regulation N° 1/2003, prohibits 72
The alternative and more traditional pricing strategy is the “wholesale model”, where the
agreements and concerted practices which may affect trade and prevent or restrict publisher charges a price to the retailer, and based on this, the retailer sets the price for the
competition. consumer.

Concurrences N° 3-2012 I Tendances 25 e-Books and the boundaries of antitrust

will need to determine whether the agreements between In the Hollywood studios case81, the Commission’s concerns

8. Another component that deserves attention - and one

that is central to the U.S. Department of Justice’s case - is the
most-favoured-customer principle, or in other words, most-
favoured-nation (MFN) clause in contractual agreements.

73
European Commission Guidelines on Vertical Restraints, OJ 2010/C 130/1,
19 May 2010.
74
European Commission Guidelines on Vertical Restraints, paragraphs 12-17. 81
See the Commission Press release of 26 October 2004 Commission closes
investigation into contracts of six Hollywood studios with European pay-
75
The Guidelines provide for three types of financial or commercial risk that are relevant TVs, IP/04/1314: http://europa.eu/rapid/pressReleasesAction.do?reference=IP/04/131
to the definition of an ‘agency agreement’: contract-specific risks, risks related to market- 4&format=HTML&aged=1&language=EN&guiLanguage=en.
specific investments and risks related to other activities required by the principal to be
undertaken in the same product market. See also cases: T-325/01 DaimlerChrysler 82
However, it is worthwhile mentioning that in early case law the Commission considered
AG v. Commission [2005] ECR II-3319; C-217/05 Confederación Espanola de that standard agreements between BMW and dealers containing uniform terms and
Empresarios de Staciones de Servicio v. Companía de Petróleos [2006] ECR conditions of cooperation had pro-competitive effects and therefore met conditions
I-11997. provided for in Article 85(3) of the Treaty Establishing the European Economic
Community: Commission Decision of 13 December 1974 IV/14.650 – Bayerische
76
Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Motoren Werke AG, OJ L 29.
Article 101(3) of the Treaty on the Functioning of the European Union to categories of
vertical agreements and concerted practices, OJ L 102, 23 April 2010. 83
In a settlement with the Commission, all of the parties withdrew their MFN clauses, and
indicated that they would not seek to implement such provisions in the future.
European Commission Guidelines on Vertical Restraints, paragraph 224.
77
84
On 11 April 2012 the U.S. Department of Justice (DoJ) filed a lawsuit against Apple,
78
Case T-17/93 Matra Hachette v. Commision [1994] ECR II-595. Hachette, Harper Collins, Macmillan, Penguin and Simon & Schuster, alleging that the
companies colluded to raise prices on e-Books. See DoJ’s Complaint U.S. v. Apple, Inc. et
European Commission Guidelines on Vertical Restraints, paragraph 12.
79
al: http://www.justice.gov/atr/cases/f282100/282135.pdf. Hachette, Harper Collins, and
80
See European Commission Guidelines on Vertical Restraints, paragraphs 12‑17. Simon & Schuster have agreed to settle. Apple responded on 22 May 2012, and has called
See also: case T-325/01 DimlerChrysler AG v. Commission [2005] ECR II‑3319, the DoJ’s lawsuit “fundamentally flawed as a matter of fact and law”and alleges
paragraphs 96-103 and 105-113; case C-217/05 Confederación Espanola de the U.S. government of siding with Amazon’s monopoly in the e-Book market. See Apple’s
Empresarios de Staciones de Servicio v. Companía de Petróleos [2006] ECR answer to the DoJ’s complaint: http://ia701206.us.archive.org/6/items/gov.uscourts.
I-11997, paragraps 60-61. nysd.394628/gov.uscourts.nysd.394628.54.0.pdf

Concurrences N° 3-2012 I Tendances 26 e-Books and the boundaries of antitrust

III. Pricing practices in the EU: 15. France and Luxembourg, on the other hand, implemented

14. In May 2009, the Commission amended the 2006/112/ “currently, there is discrimination against e-books, which are
EC directive on reduced rates of VAT with the new Council subject to a higher VAT rate than printed books in the vast
Directive 2009/47/EC. This Directive allows Member States majority of member states. My colleague Algirdas Semeta
to apply reduced VAT rates to printed books, newspapers, is working on this matter. My personal view is well known:
and periodicals. For example, in the UK and in Germany, I just cannot explain why e-books and printed books are taxed
printed books are sold at a reduced VAT rate of 0% and 7%, differently”89.
respectively. e-Books, however, are not exempt by the EC
Directive and are thus subject to the regular VAT rates of 20%
and 19%, respectively. The reason for this lies in the varying
definitions of a printed book and e-Book: printed books 86
See European Commission Green Paper on the Future of VAT Towards a simpler, more
are defined as a product, while e-Books are considered to be robust and efficient VAT system. December 2010: http://ec.europa.eu/taxation_customs/
resources/documents/common/consultations/tax/future_vat/com(2010)695_en.pdf.
an electronically-rendered service for which the consumer
87
See FEP Submission on the Green Paper on the future of VAT: http://www.fep-fee.be/
acquires a licence. In addition to the UK and Germany, other documents/FEPsubmissiontotheEuropeanCommissionGreenPaperontheFutureofVAT.pdf.
European countries applying this differentiated VAT scheme
See European Parliament Press Release of 13 October 2011 Parliament calls
88
for books include Spain (4% reduced rate versus 18% regular for VAT reforms to target fraud, help small firms and NGOs and
rate), The Netherlands (6% reduced rate versus 19% regular promote green products: http://www.europarl.europa.eu/news/en/pressroom/
rate), Austria (10% reduced rate versus 20% regular rate), content/20111012IPR29115/html/MEPs-call-for-VAT-reforms-to-target-fraud-and-
help-small-firms-and-green-goods.
Italy (4% reduced rate versus 20% regular rate), and Sweden
89
See Commission Press Release of 13 October 2011 Neelie Kroes Vice-President
(6% reduced rate versus 25% regular rate)85. of the European Commission responsible for the Digital Agenda Books in
the 21st century Frankfurt Book Fair – Opening address to representatives
85
Wischenbart, Ruediger. The Global eBook Market: Current Conditions and & members of Federation of European Publishers Frankfurt, 13 October
Future Projections. Tools of Change and O’Reilly Media. (2011). http://www. 2011: http://europa.eu/rapid/pressReleasesAction.do?reference=SPEECH/11/660&typ
publishersweekly.com/binary-data/ARTICLE_ATTACHMENT/file/000/000/522-1.pdf. e=HTML.

Concurrences N° 3-2012 I Tendances 27 e-Books and the boundaries of antitrust

18. A month later, in an address at the Forum d’Avignon, 21. Despite any resistance, however, – whether it is in the

IV. The rise and future of e-Books

in the EU
20. Digital books have encountered a fair share of pushback Data taken from PricewaterhouseCoopers’ Turning the Page:
since their introduction into the European market. Books, The Future of e-Books market study.
after all, are a strong identifier of national and literary culture
– something not only publishers, but also consumers, are keen 22. According to PricewaterhouseCoopers’ e-Book market
to preserve. In Germany for example, 78% of the population study Turning the Page: The Future of e-Books:
claim to not want to read on a screen, and 85% claim to love
“printed books too much”, believing that a device does not
“the book industry is undergoing a process of change. And it
provide the same reading experience92. France, while initially
is up to the industry itself to ensure that the digitising process
an early leader in the digitisation of its culture (e.g., France’s
does not pass by…Publishers that resist change, consider the
national digital library Gallica), was at the forefront of the
digitising process to be merely an additional cost, and attempt
opposition to Google’s library digitisation of out-of-print
to defend their existing content and business models, will face
copyrighted works93. Germany and France, in particular,
the greatest risks”94.
illustrate two key factors impacting the adoption of e-Books
in Europe in the last few years: (i) a strong national literary
23. So what does all of this mean?
culture whose traditions, which include the way books are
read, are deeply engrained in the population and (ii) the
24. To continue fostering growth in a sector that has rapidly
perceived threat of global (i.e., foreign) companies out to
evolved over the past few years – and continues to do so –
completely disrupt an industry whose last major revolution
all of the major actors involved will need to work together
was Gutenberg’s printing press.
to bring about smart policy changes required to better align
90
See Commission Press Release of 19 November 2011 Neelie Kroes Vice-President of current structures with the reality of an increasingly digitally-
the European Commission responsible for the Digital Agenda Who feeds the driven economy. These include retailers, publishers, national
artist? Forum d’Avignon 19 November 2011, Avignon, France: http://europa. and EU governing bodies, and citizens alike.
eu/rapid/pressReleasesAction.do?reference=SPEECH/11/777.
Currently, EU VAT rules stipulate that a consumer pays the VAT rate of the Member State
91
in which the supplier is located, e.g., a UK consumer buying a product on Amazon would
pay Luxembourg’s VAT rate since that is the Member State in which Amazon has been
established in the EU. The new rules effective 1 January 2015 will require businesses to
charge the VAT rate of the Member State in which the consumer is established/normally
resides.
92
Wischenbart, p. 11.
93
Recently, however, Google and French publishers announced a ground-breaking
agreement under which French authors and publishers will drop lawsuits over Google
scanning out-of-print books without permission, and publishers will begin 94
Turning the Page: The Future of e-Books. PricewaterhouseCoopers. (2010).
selling digital versions of these books. The deal gives publishers control over which Pg. 29. http://www.pwc.com/en_GX/gx/entertainment-media/pdf/eBooks-Trends-
e-Books are sold, and requires Google to keep a list that keeps track of copyright for Developments.pdf.
authors.

Concurrences N° 3-2012 I Tendances 28 e-Books and the boundaries of antitrust

25. As regards regulation, the Commission can begin by

26. Ultimately, the newer, digital forms of literary pursuits

are bringing to light not only regulatory inconsistencies
on part of the Commission, but also what seems to be a
generational culture clash in the publishing industry: an
age-old tradition of price-fixing for print books to protect
the traditional publishing model vs. the instant, digital
dissemination of content and culture to the masses at the
lowest price for the consumer. The Commission itself seems
well aware of this burgeoning sector’s significance and
potential, as Commissioner Joaquin Almunia referred to the
Commission’s probe as “an important investigation because
the e-Book market is growing very fast”.

27. The failure of the music industry to readily adapt to

the digitisation of its ecosystem can serve as a cautionary
tale. Print books are certain to remain, but with global and
national players increasingly active in the European market,
the tide has turned for e-Books; the next few years will indeed
prove to be an interesting period of growth, innovation and
competition in a sector that has experienced little disturbance
until recent years. n

95
Commissioner Kroes recently held a round table discussion with
e-Book Market players on 26 June 2012 to discuss the importance
of implementing a neutral VAT regime, and other issues including
interoperability of e-Books on reading devices, and free movement of
goods. These discussions signal a step forward, as the talks resulted in
all participants signing a declaration emphasizing the importance of
addressing these issues in the e-Book market. For more information, see
the Commission’s website here: http://ec.europa.eu/information_society/
media_taskforce/publishing/e_book/index_en.htm
96
The UK Publishers’Association has been lobbying its government to grant digital books
the same, VAT-free status as print books, with consumers joining in and organising
petitions: http://epetitions.direct.gov.uk/petitions/114.

Concurrences N° 3-2012 I Tendances 29 e-Books and the boundaries of antitrust

Concurrences est une revue trimestrielle couvrant l’ensemble des questions de droits de
l’Union européenne et interne de la concurrence. Les analyses de fond sont effectuées sous
forme d’articles doctrinaux, de notes de synthèse ou de tableaux jurisprudentiels. L’actualité
jurisprudentielle et législative est couverte par onze chroniques thématiques.

Concurrences Editorial
Jacques Attali, Elie Cohen,
Laurent Cohen‑Tanugi,
Claus‑Dieter Ehlermann, Ian Forrester,
Thierry Fossier, Eleanor Fox, Laurence Idot,
Chroniques
EntEntEs
Michel Debroux
Nathalie Jalabert‑Doury
Frédéric Jenny, Jean‑Pierre Jouyet, Cyril Sarrazin
Hubert Legal, Claude Lucas de Leyssac,
Mario Monti, Christine Varney, Bo PratiquEs unilatéralEs
Vesterdorf, Louis Vogel, Denis Waelbroeck... Frédéric Marty
Anne‑Lise Sibony
Anne Wachsmann

Interview PratiquEs rEstrictivEs

Et concurrEncE déloyalE
Sir Christopher Bellamy, Dr. Ulf Böge,
Nadia Calvino, Thierry Dahan, Muriel Chagny, Mireille Dany
John Fingleton, Frédéric Jenny, Jean‑Louis Fourgoux, Rodolphe Mesa
William Kovacic, Neelie Kroes, Marie‑Claude Mitchell, Laurent Roberval
Christine Lagarde, Doug Melamed,
Mario Monti, Viviane Reding, distribution
Robert Saint‑Esteben, Sheridan Scott, Nicolas Ereseo, Dominique Ferré
Christine Varney... Didier Ferrié

concEntrations
Tendances Dominique Berlin, Jean‑Mathieu Cot,
Jacques Gunther David Hull, David Tayar
Jacques Barrot, Jean‑François Bellis,
Murielle Chagny, Claire Chambolle, aidEs d’état
Luc Chatel, John Connor, Dominique de Jean‑Yves Chérot
Gramont, Damien Géradin, Jacques Derenne
Christophe Lemaire, Ioannis Lianos, Bruno Stromsky
Pierre Moscovici, Jorge Padilla, Emil Paulis,
Joëlle Simon, Richard Whish... ProcédurEs
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Revue des droits de la concurrence

e-Books and the boundaries

Tendances l Concurrences N° 3-2012 – pp. 12-29

Electronic copy available at: http://ssrn.com/abstract=2140778

Concurrences N° 3-2012 I Tendances 12 e-Books and the boundaries of antitrust

6. But let’s assume that antitrust law is relevant to regulate

Concurrences N° 3-2012 I Tendances 13 e-Books and the boundaries of antitrust

Storm over E-books waters

I. Introduction is that the alleged agreements generally, and Apple’s MFN

2. So what exactly is the claim that has launched this

Concurrences N° 3-2012 I Tendances 14 e-Books and the boundaries of antitrust

Concurrences N° 3-2012 I Tendances 15 e-Books and the boundaries of antitrust

Concurrences N° 3-2012 I Tendances 16 e-Books and the boundaries of antitrust

Concurrences N° 3-2012 I Tendances 17 e-Books and the boundaries of antitrust

The US e-Books case against Apple:

Concurrences N° 3-2012 I Tendances 18 e-Books and the boundaries of antitrust

Concurrences N° 3-2012 I Tendances 19 e-Books and the boundaries of antitrust

Concurrences N° 3-2012 I Tendances 20 e-Books and the boundaries of antitrust

27. The relevant antitrust question is not “which business

Concurrences N° 3-2012 I Tendances 21 e-Books and the boundaries of antitrust

Le livre numérique, entre prix unique,

Concurrences N° 3-2012 I Tendances 22 e-Books and the boundaries of antitrust

Concurrences N° 3-2012 I Tendances 23 e-Books and the boundaries of antitrust

Concurrences N° 3-2012 I Tendances 24 e-Books and the boundaries of antitrust

e-Books in the EU: Competition, pricing,

I. Introduction 3. This matter had originally been under investigation by the

Concurrences N° 3-2012 I Tendances 25 e-Books and the boundaries of antitrust

8. Another component that deserves attention - and one

Concurrences N° 3-2012 I Tendances 26 e-Books and the boundaries of antitrust

Concurrences N° 3-2012 I Tendances 27 e-Books and the boundaries of antitrust

IV. The rise and future of e-Books

Concurrences N° 3-2012 I Tendances 28 e-Books and the boundaries of antitrust

26. Ultimately, the newer, digital forms of literary pursuits

27. The failure of the music industry to readily adapt to

Concurrences N° 3-2012 I Tendances 29 e-Books and the boundaries of antitrust

Interview PratiquEs rEstrictivEs

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