German Publishers Accused of Collusion

LONDON (08/03/2000) - Are German book publishers in cahoots to squeeze out online bookstores that undercut their age-old price-setting policy?

Austrian book retailer, Libro, thinks so. And, it's convinced the European Commission to investigate. Wednesday morning, the commission staged a surprise inspection at the Bertelsmann AG's Munich-based publishing operation, as well as those of Aufbau-Verlag in Berlin, K&V and KNO book wholesalers in Stuttgart and the German Association of Book Traders in Frankfurt.

Investigators are looking for evidence that publishers and wholesalers are colluding to keep book supplies from online retailers that offer consumers discounts. A commission official said late Tuesday that it would "take some time" to determine whether any wrongdoing had taken place. He would not elaborate on what the investigators were specifically looking for.

At stake is the viability of a 110-year-old price-setting policy that's been administered by German publishers. The European Commission has ruled that the policy is fine as long as it's enacted within German borders. But in cross-border transactions, it's anti-competitive, and the very thing the commission has been established to take down.

Libro, which sells books on the Internet through its Lion.cc unit, lodged a complaint to the commission in July that said the publishers were halting deliveries on all its discounted orders and asked the commission to investigate.

"This is a new round in an old battle," says Michael Tscherny, a commission spokesman. In the past, catalog booksellers had made similar complaints against publishers and suppliers. However, it's the first time the commission has received a complaint by a Net company, Tscherny said. He doesn't expect it to be an issue that applies to anything other than book sales since the industry has been so highly regulated for so long by the Germans and Austrians.

What's brought the spotlight back onto the draconian pricing policy is the fact that European consumers are beginning to use the Net to shop for the best bargain - and often it comes from a supplier in a neighboring country. German and Austrian publishers and wholesalers set prices for their fellow countrymen, but they can't dictate the prices on cross-border sales. The commission wants to ensure that state-controlled pricing regulations don't prevent European consumers from scoring Net bargains.

"You, as the consumer, should have the right to buy books anywhere," Tscherny says. "That's our opinion."

But, he added, Libro has also drawn the suspicion of the commission. Since it made its initial complaint to the commission last month, Libro has negotiated with Bertelsmann and the other publishers to drop a lawsuit that Libro filed in exchange for a guarantee of regular shipments. "We want to know what Libro and Bertelsmann and the other publishers have agreed to," Tscherny says.

Calls to Bertelsmann and Libro were not immediately returned.

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