Antitrust probe initiated over e-book prices

The said arrangements essentially entail lowering the prices of electronic books (e-books), thereby blocking competitors from providing attractive pricing.

The deal
Connecticut Attorney General Richard Blumenthal, who is investigating such deals, averred that Amazon and Apple inked a ‘most favoured nations’ pact with major publishers, ensuring that rival booksellers would not be able to enter any arrangement that offer even lower prices.

Leading publishers like Macmillan, Simon & Schuster, Hachette, HarperCollins and Penguin have reportedly entered into agreements with Amazon and Apple.

"Both Amazon and Apple have reached agreements with the largest e-book publishers that ensure both will receive the best prices for e-books over any competitors," Blumenthal, a Democrat running for the U.S. Senate, said in a released statement.

"These agreements appear to deter certain publishers from offering discounts to Amazon and Apple’s competitors – because they must offer the same to Amazon and Apple.”

Separate investigation
Blumenthal has sent letters to Amazon and Apple asking them to "meet with his office."

“I fully understand that MFN’s are not per se illegal under our antitrust laws,” the letter stated.

“Yet, as I am sure you are aware, MFN’s are not per se legal either,” added the letter.

The present probe comes on the heels of a similar investigation initiated by the attorney general of Texas.

The Federal Trade Commission as well as the Justice Department have, in the past, conducted inquiries into Apple's business practices to determine if they are anticompetitive.

"My investigation into agreements between e-book publishers and Amazon and Apple has been initiated independent of any other law enforcement agency," Blumenthal said.

"We look forward to co-operating with any other federal or state agency that may be interested in working jointly," he added.

Market becoming attractive
Amazon and Apple are the major players in the e-book market where competition is intensifying. National retail chains such as Barnes & Noble and Borders Group are likely to give the market leaders a run for their money.

"The e-book market is set to explode -- with analysts predicting that e-book readers will be among the holiday season's biggest electronics gifts -- warranting prompt review of the potential anti-consumer impacts," Blumenthal said.

Leading publishers like Macmillan, Simon & Schuster, Hachette, HarperCollins and Penguin have reportedly entered into agreements with Amazon and Apple.

E-readers such as Amazon's Kindle or Apple's iPad thrive on digital content. The result of these arrangements could be that consumers are robbed of choice when it comes to content and price.

"This restriction blocks cheaper and competitive prices for consumers," opined Blumenthal.

The publishers are also trying to figure out ways to make money from the physical hard copy books, magazines and newspapers as digital formats attract more content.