Controversial e-book sales tactic banned in Canada

Apple Inc.'s long legal struggle over alleged anti-competitive e-book pricing took another turn on Friday as the company joined a consent agreement with Canada's Competition Bureau that will ban a controversial sales tactic for three years.

Three of Canada's four major book publishers – Hachette Book Group Inc., Macmillan (a subsidiary of Verlagsgruppe Georg Von Holtzbrinck GmbH) and Simon & Schuster Inc. – also agreed to halt a system known as most-favoured nation (MFN) pricing, which prevented competing retailers from selling e-books at a discount compared to Apple's minimum price. A Competition Bureau investigation had found that the MFN arrangement between Apple and the publishers led to higher prices for consumers.

There was no financial component to any of the agreements.

But a fourth major publisher – HarperCollins Publishers LLC – failed to reach an agreement, prompting the watchdog to refer the case to the Competition Tribunal, a separate body that adjudicates matters of business, economics and law.

"This case is about protecting Canadian consumers and ensuring a competitive and innovative digital economy," said John Pecman, Commissioner of Competition, in a statement on the Bureau's website. "I commend Apple, Hachette, Macmillan, and Simon & Schuster for entering into consent agreements that resolve my concerns related to their conduct. As no agreement was reached with HarperCollins, I am taking action today to address its ongoing restrictions on competition in Canada."

In the referral, the Competition Bureau suggests HarperCollins be barred from MFN pricing tactics for 10 years, as well as pay the court costs associated with the proceedings and "any such further relief that the Commissioner may request and the Tribunal deem appropriate."

Apple and Hachette declined to comment on the agreement, while Macmillan and Simon & Schuster Inc. did not respond to requests for comment. A statement from HarperCollins promised to fight the order.

"HarperCollins Canada is disappointed that despite repeated efforts to resolve the issues raised several years ago by the Canadian Competition Bureau regarding events which allegedly took place in the United States, the Commissioner of Competition has chosen to take action against the company. HarperCollins Canada is confident in its position that there is no violation of Canadian competition law and will vigorously defend itself against the allegations made by the Commissioner."

The agreements come after a similar case in the United States. In 2012, HarperCollins was one of three publishers that settled rather than fight an antitrust case against the alleged scheme filed by the U.S. Department of Justice, which alleged collusion among six major publishers aimed at undercutting Amazon's deep discounting practices.

HarperCollins' decision to settle, along with Hachette and Simon & Schuster, left Apple, Macmillan and Penguin to defend the case. Apple was found guilty on antitrust charges in 2013 and eventually settled with 30 states and the federal government to pay $450-million in direct consumer compensation plus fees.