U.S. Government Warns Apple and Publishers of Antitrust Lawsuit over e-Book Pricing

ibooks iconLast December, the U.S. Department of Justice acknowledged that it was conducing an antitrust investigation into the new "agency model" of e-book pricing that was championed by Apple ahead of its iBookstore rollout, a model in which publishers could set the retail prices of their books but could not sell them to retailers other than Apple for lower prices. A similar investigation has been ongoing in Europe as well.

The Wall Street Journal now reports that the Department of Justice has warned Apple and five e-book publishers that it intends to file an antitrust lawsuit against the companies over the matter, in which the companies are alleged to have colluded to raise the price of e-books.

Several of the parties have held talks to settle the antitrust case and head off a potentially damaging court battle, these people said. If successful, such a settlement could have wide-ranging repercussions for the industry, potentially leading to cheaper e-books for consumers. However, not every publisher is in settlement discussions.

The five publishers facing a potential suit are CBS Corp.'s Simon & Schuster Inc.; Lagardere SCA's Hachette Book Group; Pearson PLC's Penguin Group (USA); Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH; and HarperCollins Publishers Inc., a unit of News Corp. , which also owns The Wall Street Journal.

Many publishers were happy to sign on to Apple's agency model for book pricing, seeking to gain greater control of pricing for their content. After signing deals with Apple, they then turned to Amazon and other retailers, forcing them into the same arrangements by threatening to withhold their books from those retailers.

The Justice Department believes that Apple and the publishers acted in concert to raise prices across the industry, and is prepared to sue them for violating federal antitrust laws, the people familiar with the matter said.

The publishers have denied acting jointly to raise prices. They have told investigators that the shift to agency pricing enhanced competition in the industry by allowing more electronic booksellers to thrive.

Arguments that the agency model has actually increased competition center on Amazon's dominant position in the retail book industry, where it had frequently sold books at razor thin profits or even losses in order to attract customers for its broader shopping offerings. Under the agency model, greater price uniformity across retailers has allowed more companies to be competitive in the marketplace.

Top Rated Comments

realmike15 Avatar
133 months ago
Sounds feasible to me, I know for a fact when I check e-book vs hardcopy prices I've found e-books to be much more expensive on numerous occasions. This doesn't make sense from a printing and delivery standpoint, and makes me believe these companies are trying to take advantage of the hype and popularity behind ebooks as a new technology. I hope they come down hard on Apple and Publishers if it's true, ripping off customers should not be a business model for any company. No sympathy for greed.
Score: 40 Votes (Like | Disagree)
ElCidRo Avatar
133 months ago
Sounds feasible to me, I know for a fact when I check e-book vs hardcopy prices I've found e-books to be much more expensive on numerous occasions. This doesn't make sense from a printing and delivery standpoint, and makes me believe these companies are trying to take advantage of the hype and popularity behind ebooks as a new technology. I hope they come down hard on Apple and Publishers if it's true, ripping off customers should not be a business model for any company. No sympathy for greed.

Well said. The price of ebooks is WAY WAY too high. I even think they would make more profit if they had lower prices. Like 1/2 compared to the printed editions.
Score: 23 Votes (Like | Disagree)
WannaGoMac Avatar
133 months ago
Finally!

Fact is it costs a great deal LESS to distribute an ebook.

Fact because of DRM and continually increasing limitations on library ebook loan programs the publishers will actually sell more books in the long run compared to paper books.

Why are none of these savings (and increased sales) not being at all passed on to the consumer? Collusion by publishers to save old profit levels and potentially make higher ones because ebooks are cheaper to distribute).

I can't believe it's taken this long to get the gov regulators involved. Let's see if they actually do anything...
Score: 19 Votes (Like | Disagree)
silentbob007 Avatar
133 months ago
This isn't good! The government should not dictate what a company charges for it's products/services. If you are dissatisfied with Apple's pricing, you should buy your e-books from Amazon! If they overcharge, use Kobo or Barnes and Noble. If they overcharge, refuse to buy e-books until the pricing goes down.
It's called the free market.

Agreed that I am not a fan of government interference, but then again ... it is also a function of the government to keep a free market. If there was collusion to force others to raise their prices, then that is a place where the government has a rightful claim for interference.
Score: 9 Votes (Like | Disagree)
ihateilove Avatar
133 months ago
It's funny really: You see, on the one hand I feel it is appropriate to ensure people who make cultural things -- authors, artists, musicians and so on -- are able to make a comfortable living from their works. It enables them to focus on making the art I love.

On the other hand, I'm minded to oppose collusion. In this case, I fear only Amazon really wins, as if publishers can't keep publishing then we'll lose the more esoteric works as they'll focus entirely on mass market classics.

I find it hard to make a judgement call on what's right or wrong in this on those grounds.
Score: 8 Votes (Like | Disagree)
stockscalper Avatar
133 months ago
I think you're making the "mistake" of thinking about this logically.

Amazon gives a lot of money to democrats. The democrats are in power.

Apple competes with Amazon by undermining Amazon's monopoly on ebook publishing, and starts offering ebooks cheaper than Amazon was. So, Amazon calls their friends in washington-- Boom, Antitrust!

Antitrust is always used as a tool by one group to attack another group that is beating them in the free market.

IF you can't win in the marketplace, get government to use violence against your competitors.

This has nothing to do with Democrats or Republicans. It has to do with publishers getting together and setting prices for books and not letting book sellers, like Amazon, discount or deviate from the price they set. That's called price fixing and it's been illegal in this country for over 100 years. It's not a free market when companies collude to fix prices.
Score: 7 Votes (Like | Disagree)

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