Penguin has entered into a settlement with the European Commission over the agency pricing model for e-books.
The case that started last year and involved Penguin, along with Hachette, Macmillan, HarperCollins and Simon & Schuster, as well as Apple seems to be a hurdle in the Penguin - Random Houses merger. Hence Penguin has entered into a settlement with the European Commission over the agency pricing model for e-books.
The deal states that Penguin can proceed with its merger with Bertlesmann's Random House, first announced in October 2012, and approved by Brussels earlier this month, so that the two publishers can better battle Amazon. But in making the settlement, Penguin maintained "it has done nothing wrong," and that that its position "remains unchanged...the company continues to believe that the agency pricing model operates in the best interests of consumers and authors."
"Penguin confirms that, subject to the market test currently underway, it has reached an agreement with the European Commission to settle its investigation into the establishment of agency pricing agreements for eBooks. Penguin's position that it has done nothing wrong remains unchanged and the company continues to believe that the agency pricing model operates in the best interests of consumers and authors. While we disagree with some elements of the Commission's analysis, we are settling as a procedural matter to clear the decks in anticipation of our proposed merger with Random House," read the statement.
Penguin's concessions in the settlement reached today are essentially the same as those reached by the other four publishers. According to the EC document outlining the case, they are as follows:
1. To the extent that they have not yet been terminated, Penguin will terminate the relevant agency agreements for the sale of e-books in the EEA concluded with Apple.
2. Penguin will offer each retailer other than Apple the opportunity to terminate any agency agreements concluded for the sale of e-books that: (i) restrict, limit or impede the retailer's ability to set, alter or reduce the retail price or to offer price discounts or promotions; or (ii) contain a price MFN clause as defined in Penguin's commitments. In case a retailer decides not to make use of the opportunity to terminate such an agreement, Penguin will terminate it in line with the conditions laid down therein.
3. For a period of two years from notification of the decision to Penguin, Penguin will not restrict, limit or impede the ability of e-book retailers to set, alter or reduce retail prices for e-books and/or to offer price discounts or promotions. However, as regards agency agreements, the aggregate value of the price discounts or promotions offered by any retailer shall not exceed the aggregate amount equal to the total commissions Penguin pays to that retailer over a period of at least one year in connection with the sale of its e-books to consumers.
4. For a period of five years from notification of the decision to Penguin, Penguin will not enter into any agreement relating to the sale of e-books within the EEA that contains a price MFN clause as defined in Penguin's commitments.