‘Collusion’ Against Internet Book Selling Sparks EC Probe

The European Commission (EC) said Thursday that the refusal of German publishers to sell books to certain Internet booksellers amounts to “illegal collusion.”

As a result of the preliminary finding, the EC has opened formal proceedings against Boersenverein des Deutschen Buschhandels e.V, the German book publishers trade association, and two publishers, Bertelsmann unit Verlagsgruppe Random House GmbH and Koch, Neff & Oteinger & Co.

The EC said it would not tolerate restrictive practices which have effects on trade between members of the European Union (EU), especially when those practices preclude consumers in the EU community “from enjoying the benefits of new technologies and new ways of distribution offered in particular by the Internet.”

Banned Book Sales

Complaints from Internet bookstores in Austria and Belgium sparked the EC’s investigation into bookselling practices by German publishers and book wholesalers.

The EC said that in July 2000, Austrian book e-tailer Libro began selling German books, which it was exporting from Germany to Austria, to consumers in Germany and other countries at prices as much as 20 percent less than Germany’s fixed price.

The EC noted that several German publishers and book wholesalers immediately stopped delivering books to Libro.

Similarly, when the Belgian Internet bookseller Proxis wanted to start selling German books worldwide at reduced prices, the main German book wholesalers refused to do business with Proxis, the EC said.

Tangled Web

At the heart of the controversy is the EC’s policy of allowing “national systems of fixed book prices” as long as they have “no appreciable effects on trade between” members of the EU.

The law also states that the Germany’s fixed book prices can be applied to re-imports of German books from other EU countries if “the export and re-import constitutes a deliberate circumvention of the system.”

However, the EC found that cross-border sales of books to German consumers via the Internet “can in general not be regarded as a circumvention” of Germany’s system of fixed book prices.

Instead, the EC found that “the refusals by certain German publishers and book-wholesalers to supply Internet booksellers established outside of Germany were based on an agreement or concerted practice and thus on illegal collusion.”

Publishers Raided

The EC said that in August 2000, it raided the offices of publishers, wholesalers, and the Boersenverein des Deutschen Buschhandels e.V to gather evidence.

The Boersenverein des Deutschen Buschhandels e.V and the two publishers charged by the EC have three months to reply to the allegations and the right to a hearing, which the EC said would take place in the fall.

Border Battles

The blurry boundaries of the Internet have created headaches for governments and merchants around the world as they try to apply laws meant for a brick-and-mortar economy to cyberspace. One of the primary issues is whether cross-border transactions should be governed by the laws of the country where the transaction originates — or the laws of the country to which the merchandise is shipped.

The controversy over who governs cyberspace has the U.S. Federal Trade Commission and the American Bar Association calling for global guidelines to govern cross-border e-commerce. Last year, the ABA’s Global Cyberspace Jurisdiction Project concluded after two years of study that the Internet needs multinational rules that do not depend upon physical location.

“It’s as if we’ve landed on Mars and we’re constructing a commercial and business setting,” project chair Thomas Vartanian said upon releasing the report. “We have to establish new rules of engagement and we have to get people used to dealing with those new rules.”