UPDATE 2-Europe probes publishers, Apple on e-book pricing

Tue Dec 6, 2011 11:11am EST

* E-book units of Lagardere, Pearson, News Corp under investigation

* CBS's Simon & Schuster, Germany's Verlagsgruppe Georg von Holzbrinck also involved

* EU regulator says agency agreements may breach antitrust rules

* U.S. regulators also probing e-book deals

By Foo Yun Chee

BRUSSELS, Dec 6 (Reuters) - The European Commission is investigating whether e-book publishers owned by Lagardere , Pearson Plc, News Corp and two other firms fixed prices with Apple Inc, blocking rivals and hurting consumers.

The decision by the European Commission to open an investigation on Tuesday followed raids on the companies in March this year.

U.S. regulators are also looking into pricing deals imposed under an agency model in which publishers set the retail price. Antitrust rules forbid price-fixing agreements designed to shut out competitors or that could result in consumers paying more.

"The Commission will in particular investigate whether these publishing groups and Apple have engaged in illegal agreements or practices that would have the object or the effect of restricting competition in the European Union or in the European Economic Area," the European Union's executive Commission said in a statement.

"The Commission is also examining the character and terms of the agency agreements entered into by the above named five publishers and retailers for the sale of e-books," it said.

It identified the publishers as French media-to-aerospace group Lagardere's Hachette Livre unit, News Corp's Harper Collins, CBS Corp's Simon & Schuster, Pearson's Penguin and Verlagsgruppe Georg von Holzbrinck, which owns Macmillan in Germany.

A Pearson spokesman said the group would work with regulators in the investigation.

"Pearson does not believe it has breached any laws, and will continue to fully and openly cooperate with the Commission," the spokesman said.

Apple and Hachette Livre declined to comment. Harper Collins and Simon & Schuster said they were cooperating with the investigation.

Publishers adopted the agency model last year when Apple launched the iPad, allowing publishers to set the price of the sale of e-books. In turn, they would share revenue with the retailer. In the past, publishers would sell e-books on a wholesale model for 50 percent of the retail price.

The investigation shows the EU regulator is cracking down on suspected infringements in the digital sector, said Douwe Groenevelt at law firm De Brauw Blackstone Westbroek in Brussels.

"The probe seems to be focusing on a distribution model particular to e-books. We can expect the Commission to investigate other distribution models in the digital sector," he said.

In the traditional "wholesale model", publishers set a recommended retail price, but the seller is free to offer deep discounts.

E-books are fast gaining popularity in Europe and in Britain e-books already account for about 10 percent of book sales by volume and a fifth of revenue.

Britain's Office of Fair Trading said on Tuesday it would coordinate with the EU regulator on the e-book sector and was closing its own investigation into the matter.