OFT launches inquiry into e-book industry

Nick Clark
Thursday 03 February 2011 01:00 GMT

The consumer protection watchdog has launched an investigation into the fast-growing electronic book market, over claims that pricing deals between publishers and retailers may have breached competition rules. The move follows a similar inquiry launched in the US last year.

The Office of Fair Trading (OFT) this week revealed it had opened an investigation "into arrangements between certain publishers and retailers for the sale of e-books" following a "significant number" of complaints.

The regulator did not name any of the parties affected by the inquiry, but is investigating whether any of the industry deals were anti-competitive and could affect trade in the UK. The investigation will be led by Andrew Groves, deputy director of the OFT. The issue focuses on publishers' ability to set e-book prices using the "agency" pricing model, which has been held responsible for stifling competition.

Amazon dominates the sale ofe-books, with 500,000 titles available to buy in the UK and a further million available free. The group said its Kindle e-reader had been the best-selling product over Christmas and for all of 2010. Apple muscled into the space last year when it launched its iBookstore, which allows consumers to download titles to their iPad tablets and iPhones. Sony and Samsung also offer e-readers in the UK.

The OFT released few details on the investigation but said the case was at an early stage and "it should not be assumed that the parties involved have breached competition law".

E-books are continuing to soar in popularity on both sides of the Atlantic, and celebrities including Cameron Diaz and Jennifer Aniston have been spotted glued to their Kindles. Amazon revealed that in its last financial quarter, sales of e-books outstripped paper copies in the US; the company said it had sold 115 e-books for every 100 paperbacks. The numbers did not include downloads of free books. Amazon's announcement came just three years after the launch of the Kindle. In the US market, the book retailer Barnes & Noble has joined the competition with the launch of its Nook e-reader.

In August, Connecticut's attorney-general said his office had started an investigation into the pricing of digital books over concerns that agreements between retailers and publishers were anti-competitive. It has expressed these concerns to Apple and Amazon.

The news from the OFT came a day after Sony attacked Apple, saying the Californian electronics giant was blocking Sony's customers from reading e-books on Apple's devices.

Apple has blocked Sony from offering software that will allow iPad and iPhone users to read books they have bought at Sony's online store, the Japanese group said.

Concerns have been raised over the threat posed by e-books to high-street retailers, as well as the threat of piracy. Dan Cryan, an analyst at Screen Digest, believes the market is about to see a surge in book piracy.

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