2012.04 Article: US Department of Justice Targets Apple for Fixing E-Book Prices

Compiled by Holly McEntee from various online news sources

The US Department of Justice has filed an antitrust lawsuit against Apple for alleged e-book price fixing. 

Apple had reportedly been in talks with federal regulators but had failed to come to an agreement to settle their concerns. Along with Apple, five book publishers are also reportedly under investigation for price fixing: HarperCollins Publishers, Hachette Book Group, Macmillan Publishers, Penguin Group, and Simon & Schuster "colluded to increase prices" on popular books.

The probe apparently stems from changes made to how publishers charge for e-books when Apple released the first iPad two years ago. Book publishers began using an "agency model" in which publishers set their own e-book prices, rather than the traditional wholesale model in which publishers set a retail price and retailers set their own sales price. The pricing model materialized in 2010 after book publishers asked Amazon to increase the price of e-books on its website, but Amazon stood firm in its contention that anything above $9.99 was too high. Amazon eventually relented after many popular Macmillan titles disappeared from the e-tailer's site.

Apple is fighting the price-fixing allegation, saying in a statement "The launch of the iBookstore in 2010 fostered innovation and competition, breaking Amazon's monopolistic grip on the publishing industry.... Since then customers have benefited from eBooks that are more interactive and engaging. Just as we've allowed developers to set prices on the App Store, publishers set prices on the iBookstore."

The DOJ alleges that Apple and publishers crafted a deal whereby no other e-book retailer could offer a price lower than Apple. Sharis A. Pozen, acting assistant attorney general within the DOJ's antitrust division, said that publishers reportedly referred to the "wretched" $9.99 pricing scheme for e-books via Amazon, and wanted to force Amazon to up its prices. Pozen quoted former Apple CEO Steve Jobs, who reportedly said of the deal: "The customer pays a little more, but that's what [publishers] want anyway."

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