DOJ Sues Apple Over Digital e-Book Prices

The U.S. Department of Justice on Wednesday brought a lawsuit against Apple and several publishing companies over a scheme to fix e-book prices. The agency jumped directly into the fight over the future of digital books and Amazon came out the winner.

The announcement, made in Washington by Attorney General Eric H. Holder Jr. and Sharis A. Pozen, the acting assistant attorney general of the Justice Department’s antitrust division, capped a long investigation. The inquiry hinged on the question of whether publishers, at the urging of Steven P. Jobs, then Apple’s chief executive, agreed to adopt a new policy in 2010 that in essence coordinated the price of newly released e-books at the price offered in Apple’s iBookstore — typically between $12.99 and $14.99.

At the time, Apple with its blockbuster iPad was trying to challenge Amazon’s hold on the e-book market. Amazon, the online retail giant, had become a kind of Walmart for the e-book business by lowering the price of most new and best-selling e-books to $9.99 — a price meant to stimulate sales of its own e-reading device, the Kindle.

Publishers, looking for leverage against Amazon, saw Apple as their white knight. The Justice Department complaint, using language that could have been inspired by a best-selling white-collar crime novel, describes how executives from the publishing companies met to discuss business matters “in private rooms for dinner in upscale Manhattan restaurants,” tried to hide their communications by issuing instructions to “double-delete” e-mails, all the time complaining of Amazon’s increasing influence over the e-book market.

Ultimately, the Justice Department charges, the publishers and Apple conspired to limit e-book price competition, increasing Amazon’s e-book retail prices and causing “consumers to pay tens of millions of dollars more for e-books than they otherwise would have paid.”

Three publishers that were investigated, the Hachette Book Group, Simon & Schuster and HarperCollins, have already agreed to a settlement that will most likely overturn their pricing model. Macmillan and Penguin Group USA, which were also named in the suit, have not settled.

For consumers, the suit and settlements could ultimately pave the way for lower e-book prices. The publishers who have settled are required to end their e-book contracts with Apple and any other retailer with a “most favored nation clause,” which says that no other retailer can sell e-books for a lower price. For two years, the publishers are also prohibited from restricting any retailer’s ability to discount e-books.




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