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Singapore – Kobo Obtains Stay In Canadian e-Books Saga.

20 August, 2014

 

On 18 March 2014, Canada’s Competition Tribunal (“Tribunal”) granted e-reader company Kobo Inc.’s (“Kobo”) application to stay the implementation of a Consent Agreement entered between the Canadian Competition Bureau (“Bureau”) and four major e-book publishers (namely, Hachette Book Group; HarperCollins; Macmillan; and Simon & Schuster) (“Consent Agreement”), pending a decision on the merits of Kobo’s application to rescind or vary the same.


Under the Consent Agreement, which was reached on 6 February 2014 following an 18- month long investigation into the Canadian e-books industry, the four publishers agreed to remove or amend the most-favoured-nation clauses (which provide for the retailer to be charged the lowest price offered by the publisher to any other retailer) and the agency agreement terms (under which the retailer is paid a commission for the sale of the publisher’s e- books) under their distribution agreements with e- book retailers. The Bureau had alleged that these arrangements prevented Canadian e-book retailers from offering discounts and as such, had the effect of restricting retail price competition in the sector.


Despite the Bureau’s claims that the Consent Agreement would increase competition amongst e-book retailers and benefit Canadian consumers in the form of lower prices, Kobo argued that the settlement would, on the contrary, reduce competition amongst retailers. In particular, Kobo pointed to the exit of Sony from the e-book retail market in the US, as well as the losses suffered by Barnes & Nobles’ e-book division and the closure of its own US office, to contend that similar settlements between e-book publishers and competition authorities in the US have lowered the number of viable competitors in the e-book retail market by enabling certain retailers to price below their cost of acquisition or at rates unsustainable by other competitors.


This position is supported by Indigo Books & Music Inc. (“Indigo”), Canada’s largest book retailer. In its request for leave to intervene in the proceedings, Indigo argued that the implementation of the Consent Agreement would impair Kobo’s ability to compete effectively in the Canadian market, and further contended that the result would be to grant Amazon.com, Inc. (“Amazon”) a monopoly in the already highly- concentrated Canadian e-books market, by removing or diminishing Amazon’s only effective competitor in Canada.

In granting the stay, the Tribunal observed that Kobo’s application highlighted concerns which were in the public’s interest to address. Nonetheless, the substantive outcome of Kobo’s challenge is still to be determined.


In Singapore


The Competition Commission of Singapore (“CCS”) does not currently have a formal settlement procedure specified in its guidelines. However, CCS has indicated that it may be considering the implementation of such in the future.

 

Drew & Napier

 

For further information, please contact:

 

Cavinder Bull, Director, Drew & Napier

cavinder.bull@drewnapier.com

 

Chong Kin Lim, Director, Drew & Napier

chongkin.lim@drewnapier.com

 

Scott Clements, Drew & Napier

scott.clements@drewnapier.com

 

Drew & Napier Competition & Antitrust Practice Profile in Singapore

 

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