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Canadian Judge Explains Why Agency eBook Pricing is Still Alive North of the 49th Parallel

No one 3042385915_e18c03d94e[1]was surprised when Kobo objected to the end of Agency pricing in Canada, but when the Canadian Competition Tribunal granted them an initial delay it did come as a shock.

The Tribunal has since laid out their reasons for the delay, and for hearing Kobo’s objection, and for the most part they make sense. According to the summary written by Justice Donald J. Rennie, the chairperson of the Competition Tribunal, Kobo was granted the initial delay because without it Kobo would have been harmed even if they won their case.

Rennie notes that “In my view, the balance of convenience favours granting the stay. While maintaining the status quo might have the effect of depriving consumers of lower e-book prices in the short term, not granting the stay will certainly have a profound impact on the usefulness of Kobo’s application. In the event that Kobo is successful in its application and the Tribunal finds that the Consent Agreement ought to be rescinded or varied, Kobo would have already suffered loss and there would be no way to wind back the clock.”

But that’s not all. The summary goes on to indicate that the Tribunal might rule in Kobo’s favor. Apparently it is reasonable to listen to Kobo’s objections because there is no evidence that any collusion or anti-competitive activities occurred.

The consent agreement, which was negotiated by the Canadian Competition Bureau and 4 publishers (Hachette, Harpercollins, S&S, and Macmillan), says that the publishers don’t admit to any wrongdoing. There was also no evidence in the consent agreement to show the existence of an anti-competitive agreement or arrangement between the consenting publishers.

It was for those two reasons that the Tribunal decided that the consent agreement might not be enforceable: "Can the Tribunal make an order prohibiting a person from doing anything under a putative 90.1 agreement where it has not identified any terms of such an agreement or is not satisfied that such an agreement exists or is proposed?"

The non-legalese version is that the publishers avoided an investigation which would air their dirty laundry by giving the Canadian govt what it wanted (more competition in the ebook market). But because there was no investigation, there is also no evidence of wrongdoing, and that means that the publishers aren’t allowed to give the Canadian govt what it wants.

Tell me, does that reasoning remind anyone of a certain scene from The Princess Bride?

Snark aside, I’m not sure how Kobo is going to come out ahead here.

If the consent agreement is set aside, the 4 publishers will be investigated and evidence will probably show that they did something naughty. They will be forced to give up control of the retail prices of their books – just like under the consent agreement.

The airing of dirty laundry is exactly what the publishers were trying to avoid, so I would bet that one or more will decide to at least to try to trump the investigation by voluntarily complying with the terms of the unenforceable consent agreement – and ending Agency pricing.

It looks like Kobo’s worst fear is probably going to happen no matter what, so anything that happens after this is probably going to be moot.


image by scazon

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fjtorres March 28, 2014 um 7:57 pm

There already is evidence in the public record in the form of emails where several of the publishers discuss coordinating higher canadian prices through Indigo "the way Apple did for us in the US".
Despite that I fully expect Kobo to prevail.

Nate Hoffelder March 28, 2014 um 8:12 pm

Really? I didn’t know about those emails. Thanks.

fjtorres March 28, 2014 um 10:26 pm

Oh, the prosecution in the Apple trial found an arsenal of smoking guns in their discovery. The publisher emails is why the judge stopped just short of saying they perjured themselves. Those folks knew what they were doing was illegal and were only concerned about getting caught.

fjtorres March 28, 2014 um 10:34 pm

Page six of the pdf here:

fjtorres March 28, 2014 um 10:42 pm

1 A year later, Penguin CEO David Shanks admitted Apple’s role in facilitating the conspiracy in response to a suggestion that Penguin meet with other major publishers and booksellers to discuss how they all could work together to raise e-book prices in Canada: “We would never meet with Barnes and all our competitors. The Government would be all over that. We would meet separately with Indigo being the facilitator and go between. That is how we worked with Apple and the government is still looking into that.”2

Nate Hoffelder March 29, 2014 um 10:43 am

Interesting. That email implies that Kobo might have been the hub of the conspiracy in Canada (they were owned by Indigo at the time). If there is an investigation Kobo might end up being slapped with fines.

fjtorres March 29, 2014 um 12:21 pm

Nah, I doubt they’d get anything worse than a scowl.
If you dig into Indigo’s history, you’ll find they are very well-connected in the Canadian circles of power and have lots of strings they can pull.
I doubt they’ll even get around to investigating.

fjtorres March 29, 2014 um 12:37 pm

To get an idea of the power Indigo wields, see how long it took Amazon to be allowed to open their first canadian warehouse and the terms they had to agree to:

15 years.

Bob W January 20, 2015 um 1:58 pm

Maybe it wasn’t a good idea for Kobo to complain to the Canadian Competition Bureau. It appears they’re finally investigating how they were harmed.

Nate Hoffelder January 20, 2015 um 2:04 pm


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