Eddie Powell Partner 15 September 2010 Digital Publishing Forum: Emerging Business Models and Products The agency model for e-book sales: legal issues Eddie Powell Partner 15 September 2010

Structure Where are we now? The agency approach Legal issues around price fixing Solution: establishing a genuine agency MFN

Where are we now? Wholesale/distributor model Publisher can recommend price Discounting possible Amazon – for the time being!

What is the agency model? Publisher sets prices Retailer follows publisher’s instructions – no discounting Retailer deducts commission

Why could this be a bad thing? Nothing intrinsically wrong with agents Increased consumer/contract risk Apple iBooks - Apple terms apply Commercial Agents Regulations risk Move away from free reseller model provoking ‘price fixing’ allegations Penalties for breach of competition law

EU/UK competition law Article 101 EU Treaty Chapter One Prohibition Competition Act 1998 Prohibits agreements/concerted practices ‘between undertakings’ which distort or restrict competition Price fixing expressly identified as an example

The solution: a genuine agency relationship Agent is someone with power to negotiate or conclude contracts on behalf of principal Can contract in the name of agent or principal Agent can act for more than one principal Key issue is risk – agent takes none Each case determined on its own merit

Genuine agency – EU Commission guidance No property in goods/responsibility to supply services No contribution to costs of delivery No stock risk No third party liability

Genuine agency – EU Commission guidance cont… No contract risk – non performance No investment in sales promotion No market-specific investment unless reimbursed No activities within market

If agency isn’t genuine: detailed analysis Art 101(3) EU treaty/ S.9 Competition Act 1998 Allows restrictions which contribute to production or distribution of goods/technical progress As long as consumers get fair share of benefit Restrictions must be indispensable Will not result in elimination of competition

Best price/most favoured nation Agreement to match the best price offered in same territory On its own, not price-fixing BUT industry-wide conduct (Hollywood Studios 1994) undermines agency concept?

Conclusion/questions Contact: Eddie Powell T +44 (0) 3036 7362 E epowell@fladgate.com Fladgate LLP | 16 Great Queen Street | London WC2B 5DG T +44 (0)20 3036 7000 | F +44 (0)20 3036 7600 | DX 37971 Kingsway | www.fladgate.com