The European Commission is investigating whether Apple’s arrangements with book publishers for the sale of e-books amount to anti-competitive agreements contrary to Article 101 of the Treaty on the Functioning of the European Union. Article 101 prohibits any agreement whose object or effect is the distortion of trade within the EU and covers arrangements such as resale price maintenance, under which the purchaser resells to its customers at the price agreed with the purchaser’s supplier. In paper book sales, publishers sell to retailers with a recommended retail price, which the retailers are free to follow or not.
In Apple’s business model, it calls itself an agent and gets a commission on the sale price. In genuine agency situations, the supplier is free to tell the agent what price to sell at. However, if it is not a genuine agency situation, this is forbidden. The EU rules as to what amounts to a genuine agency are complex. They include looking at who bears the financial risk or commercial risk in the sale of the books.
The Commission will now investigate. If found guilty, the parties to anti-competitive arrangements can be fined up to 10% of their turnover, the agreements are unenforceable and third parties can sue for damages.