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Apple Notifies European Publishers of 5-Year Halt to 'Most Favored Nation' E-Book Clause

As noted by SetteB.IT, Apple has notified its European publishing partners for the iBookstore that it has suspended the "most favored nation" clause of its book-selling contract for a period of five years. The clause had prevented publishers from selling their books to other distributors at prices lower than those offered to Apple.

The arrangement had been the subject of an antitrust investigation by the European Commission and a settlement in that case was officially approved last week.
Apple hereby notifies you that, until December 18, 2017, with respect to any book sold in the European Economic Ares (EEA), Apple will no longer apply nor enforce any retail price parity (also know as retail price MFN) provisions in your eBook Distribution Agreement (e.g. Section 5(b) of the Agreement). The change is being made pursuant to a settlement between Apple and the European Commission to resolve case number 49847. The European Commission investigation of Apple's eBook business is now closed. The European Commission has signaled that it will not challenge any other term of our ebook distribution agreement.

Apple notes that the EEA where the new directive applies includes Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom.

Apple worked with publishers to facilitate a landmark shift in the business model for selling books, shifting to an "agency model" in which publishers set retail prices and distributors such as Apple receive a negotiated share of that retail price, similar to how the App Store operates. Under the previous wholesale model in which distributors were allowed to set their own retail prices, Amazon was able to hold a dominant share of the market as it sold books at or below cost in order to entice customers into visiting the site to purchase other products and services.

A key part of the agency model was Apple's "most favored nation" clause guaranteeing that Apple received the best possible pricing from publishers. The move effectively meant that all major distributors offered very similar pricing on books, but with the elimination of that clause publishers are now free to negotiate with distributors, a move that will likely to allow market leaders like Amazon to gain better pricing than smaller rivals.

Top Rated Comments

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23 months ago
Excellent, I'm sick of ebooks costing more than dead tree books, and apple are totally to blame with their anti consumer anti competition crap. Most favoured nation? Wtf?

And usually these forums are so full of "competition is the only way to do things, anything else is amoral"..
Rating: 10 Votes
23 months ago
Hooray! This should result in less expensive ebooks. That "agency model" is what kept the price of so many ebooks so high.
Rating: 6 Votes
23 months ago

What I find amusing is there is nothing stopping people from finding PDFs of books in Google by doing a search for a book and choosing advanced search File:PDF and then converting the PDF using Calibre to ePub. True, you might not be able to find all your books, but I bet a lot will be available in PDF somewhere.

Then your issue of it working on any device is solved.

Thanks for detailing how to steal eBooks.
Rating: 6 Votes
23 months ago

Now, I have to pay more to buy an eBook on Amazon? That's too sad. :o


No, it means that you may buy it at the same price that you will find it on iBook store or maybe lower if amazon or others can get it at a lower cost to them or decide to sell it to a loss to get you to buy from them. It's a consumer win IMO
Rating: 6 Votes
23 months ago

So you are saying price match is a dumb idea; because it is better to pay more if BestBuy cannot get the product at the same low price as WallMart ?
http://www.bestbuy.com/site/Payment-Pricing/Best-Buy-Price-Match-Guarantee/pcmcat204400050011.c?id=pcmcat204400050011

To give you an example:
I bought the BluRay Movie "Leap Year" from ColumbiaHouse.com for $8.89, and on iTunes it costs $14.99 (both are 1080p). Because publishers can charge Apple more than what they charge the company which nowadays runs the ColumbiaHouse web-site. BUT THIS GOOD ?
And don't tell me the 30% which Apple is charging is causing the difference, because as you may know brick-and-mortar stores typically operate with overhead of about 50% - and not to rip you off; but just to make a profit to stay in business (Borders comes to mind).


Is it fair that apple gets to set terms of pricing for every company, removing a companies ability to loss lead, while ultimately leading to increased consumer pricing across the board.

EU and USA don't seem to think so.
Rating: 5 Votes
23 months ago
Good! This shouldn't be there in the first place.
Rating: 3 Votes
23 months ago
Now, I have to pay more to buy an eBook on Amazon? That's too sad. :o
Rating: 3 Votes
23 months ago
Who cares? iBooks has been a disaster anyway. Much like Maps and Match. Only a fool would buy an e-book that's tied to only one maker's devices.
Rating: 2 Votes
23 months ago

where you get this from?


My company publishes books, both "traditional" paper books and ebooks. My statement is based on firsthand experience with Amazon's digital publishing division.

Amazon pay the wholesale price (example $11) and it doesn't matter to the publisher if Amazon put it on sales for $15, $11 or $8. They would get $11 in each case.


That hasn't been my company's experience. However, we are a small publisher, and independent of the major publishing houses, which may have terms different than ours. We discovered in mid-2011 that Amazon was "price-matching" several of our ebooks, and only paid us based on Amazon's lowered price, not the price we set. The practice continues to this day.


With the price fixing between the publishers, Amazon is forced to take a 30% commission on each sales and can't discount.

Example: ebook price is $14.99 (Amazon takes $4.49 as the agent).


Again, our experience has been different. I'm not saying you are incorrect — what you assert may be true for the major publishing houses. I speak only as a representative of a small publishing company.
Rating: 2 Votes
23 months ago

So you are saying price match is a dumb idea; because it is better to pay more if BestBuy cannot get the product at the same low price as WallMart ?
http://www.bestbuy.com/site/Payment-Pricing/Best-Buy-Price-Match-Guarantee/pcmcat204400050011.c?id=pcmcat204400050011

To give you an example:
I bought the BluRay Movie "Leap Year" from ColumbiaHouse.com for $8.89, and on iTunes it costs $14.99 (both are 1080p). Because publishers can charge Apple more than what they charge the company which nowadays runs the ColumbiaHouse web-site. BUT THIS GOOD ?
And don't tell me the 30% which Apple is charging is causing the difference, because as you may know brick-and-mortar stores typically operate with overhead of about 50% - and not to rip you off; but just to make a profit to stay in business (Borders comes to mind).


No... you really don't get it. This isn't even remotely the same thing. For one, we have capitalism and free commerce in the usa. Fixing costs and prices is more akin to communism. Which is also why it's not legal in the USA.

By the way, columbia house is OWNED by the studio... buying from columbia house is almost like buying direct from the content creator in MOST cases. Thus, they make MORE money than you buying the movie from a retailer because it's their movie, made and manufactured by them. That was the case with all the CD clubs back in the day too. The bulk of thier offerings were from their own labels.

Apple didn't just rig the cost of items, but the retail price. Why should anyone not be able to get a sale price on an ebook because apple price fixed an entire industry?? MOST of the time, when Amazon sells a book or ebook cheaper than a competitor, they take a loss on margin to do so. Apple is more than free to let publishers set retail prices if they want... and they are also free to keep a 30% cut.... but that means apple isn't giving you a sale ever. When apple has a promotional price on anything, the content owner is taking a hit, not apple... this is not the same with regular retailers.

Price matching is only smart business. Say best buy's cost on a movie is $9, and they sell it for $19.99... a competitor has it on sale for $9.99... would it be better to make 99 cents and match a price, or totally lose a sale and make $0? And if best buy wants a better wholesale price, they can always elect to buy a larger volume of an item to get that price. That's free enterprise. This is how wal-mart became the behometh it is. They would buy massive bulk of items, sell them cheap, pack their stores, while most other items were not big savings. Over time, they managed to dominate all categories to always have the highest volume of sales and thus the best costs. Any retailer if free to buy in bulk for better costs.

Trying to compare brick and mortar stores to digital media is like apples and oranges. Brick retailers sold their souls years ago by signing contracts with companies for shelf space. Manufacturers would pay a guaranteed amount of money for a certain percentage of square footage or premium space (such as an end cap or have their products at a certain height like on a tv wall). This guaranteed the store money even if they didn't sell the merchandise. The down side to this model is that other products get hidden and don't sell as well or they can't carry certain brands or products because of shelf space agreements and then people turned to discount stores that only sold items at the best price, with less variety such as target or walmart who sells 20 tv models vs 150 at a big box electronics store. Best Buy slit their wrists with those kind of deals, as well as all the major department stores years ago leasing space to designers like polo and tommy hillfiger. Space that used to house other cheaper merchandise that sold better. So look at Target, you will see 10 shelves of Neutrogena products... but maybe 5 facings of a lesser known brand. Target will never having the volume or buying power of the lesser brand because they can't give it any more space because other companies bought the space. You have less choice, but you're probably buying the neutrogena anyway.

Digital media is a different beast... there is no shelf space, no inventory, nothing. Amazon might get a better cost on an ebook because they can negotiate taking larger shipments of print books... but so could someone like Barnes & Noble... who fails to grasp the strategy of volume over margin.

What Apple did wasn't just fix costs, but prices. They made ebooks the same price no matter where you bought them. Consumers did not benefit from it at all. Imagine if they did this in regular retail... you would never need a price matching policy because everything would cost the same. Stores wouldn't be competitive because they'd all have the same price, so who cares where you shopped? That's communism.
Rating: 2 Votes

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