1. 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

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

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

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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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?

12. Conclusion/questions
Contact:
Eddie Powell
T +44 (0) E
Fladgate LLP | 16 Great Queen Street | London WC2B 5DG
T +44 (0) | F +44 (0) | DX Kingsway |