Deal with Competition Bureau should lower e-book prices

While the Competition Bureau has announced a deal aimed at lowering the price of electronic books, a class action over the practices of Apple Inc. and several major publishers will go ahead, according to a lawyer involved in the case.

On Friday, the bureau said it had signed a consent agreement with Hachette Book Group, HarperCollins, Macmillan, and Simon & Schuster that would remove or amend clauses in their distribution agreements with retailers that it believes was restricting retail price competition.

“Overall, it’s good news for everyone because hopefully this will drive the pricing down,” says Luciana Brasil, a partner at Vancouver’s Branch MacMaster LLP who along with Ward Branch is representing the plaintiffs in a class action against Apple, the four publishers that signed the agreement with the bureau, Penguin Group Inc., and Pearson Canada Inc.

“This agreement should benefit Canadian consumers by lowering the price of e-books in Canada,” said commissioner of competition John Pecman in announcing the deal.

“Businesses operating in the digital economy must realize that anticompetitive activity will not be tolerated, whether it occurs in the physical world or the digital one.”

The dispute dates back to the early days of the iPad when Amazon Inc. was a dominant seller of electronic books. The lawsuit alleges in January 2010, Apple and the other defendants entered into a deal to move from a wholesale model to an agency approach to selling the books and that would provide Apple with most-favoured nation pricing status.

“This pricing status prohibits competing e-bookstore retailers from pricing any e-books below Apple’s pricing,” the class action alleges.

As a result, “members of the class are forced to pay artificially high prices for e-books published by the defendant publishers,” it continues.

The deal with the bureau will mean an end to the most-favoured nation status as the publishers made a “commitment not to engage in practices that caused concern for the commissioner,” according to Brasil.

According to the bureau, the deal follows an 18-month investigation into the electronic book industry. It alleged the publishers engaged in conduct contrary to the civil competitor collaboration provision in s. 90.1 of the Competition Act. Despite the deal, it noted its investigation into the electronic book industry continues. It also noted that similar settlements in the United States in 2012 and 2013 resulted in lower prices with discounts of 20 per cent or more on some bestsellers.

According to Brasil, the class action will continue with a certification hearing set for May 28.

“We’re not only looking forward but we’re looking backwards,” she says, noting the class action is seeking redress for customers who overpaid for their books.

Still, she notes the latest development is positive. “It does affect the class action in the sense that one of the things we were asking the court to do was to stop this conduct on a go-forward basis.”

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