Amazon, Apple E-Book Deals Face Inquiry

Arrangements between the two companies and major publishers have prompted worries about anti-competitive pricing.
Connecticut Attorney General Richard Blumenthal on Monday said that his office had begun an inquiry into agreements between e-book publishers and the two largest sellers of e-books -- and Apple -- that could limit price competition.

Blumenthal last week sent letters to and Apple seeking to meet with the respective companies to discuss the implications of the industry's shift from a wholesale pricing model to an agency pricing model.

The wholesale pricing model is one in which the publisher sells e-books to an intermediary and the intermediary re-sells them at whatever price it chooses.

The agency pricing model is one in which the publisher sells e-books to consumers and any intermediary in the sales process, such as Amazon or Apple, takes a percentage of the publisher-determined sale price as a commission.

Blumenthal is particularly interested in "most favored nation" (MFN) contract clauses that Apple and Amazon have apparently struck with publishers such as Macmillan, Simon & Schuster, Hachette, HarperCollins and Penguin.

These contractual provisions mean that if a publisher lowers the price at which it offers an e-book to Apple, it must offer the same price to Amazon.

Noting that the legality of MFN clauses is not certain, Blumenthal said in his letters that he's concerned this pricing arrangement will limit price competition.

He notes that his office has already found that the prices for several bestselling titles selected from the New York Times list were the same at Amazon, Apple, Borders and Barnes & Noble.

Google, meanwhile, is on the verge of launching its e-book service, Google Editions. Last week, the company asked participants in its Google Books Partner Program to submit their e-books in the ePub file format by August 6 so they can be made available later this year.

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