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Publishers and Apple face inquiry

An EU consumer watchdog is to investigate whether Apple helped five major publishers illegally raise prices for e-books when it launched its iPad tablet.

The inquiry offers a glimpse into the fierce fight for shares of the growing e-book market, especially as Apple has tried to take on Amazon and its Kindle e-book reader.

In particular, the European Commission is investigating a significant shift in the way the price of e-books is determined that occurred in 2010, just as Apple introduced the iPad and its own online book store, iBookstore.

Apple was the first retailer that allowed publishers to move to so-called agency agreements, in which publishers get to set the price at which online bookshops sell e-books. Previously publishers were able to set the wholesale price of e-books, while the retailers decided at what price to sell them on.

"The Commission has concerns that these practices may breach EU antitrust rules that prohibit cartels and restrictive business practices," a spokesman said.

Giving publishers the power to set retail prices could effectively restrict competition between online bookshops, since it takes away the power from individual retailers to set lower prices. Since Apple's deal with the publishers, several other online retailers have also shifted to the agency model, possibly in an attempt to secure the rights to sell popular e-books.

The investigation targets publishers Hachette Livre, a unit of France's Lagardere Publishing; Harper Collins, owned by Rupert Murdoch's US-based News Corp.; CBS's Simon & Schuster; Penguin, which is owned by UK publishing house Pearson Group; and Germany's Verlagsgruppe Georg von Holtzbrinck, which owns Macmillan.

The Commission stressed the probe was in its early stages and did not mean the companies actually broke EU competition law.

It follows a similar investigation by the Office of Fair Trading in the UK and a class action lawsuit against the same five publishers and Apple filed this summer in the US District Court for the Northern District of California.

The UK OFT closed its own probe, since the Commission has taken over the case, but said it was co-operating closely with the EU investigation. It said in a statement that its investigation was triggered by several complaints, without naming the complainants.

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