E-book antitrust case: Justice Dept. sues Apple and 5 publishers

The U.S. Department of Justice has filed a lawsuit last Wednesday against Apple and five major book publishers, accusing them of conspiracing to fix e-book prices in 2010.


HarperCollins, Hachette, Penguin Group, Macmillan and Simon & Schuster teamed up with Apple to set the price under the condition of giving the giant a 30 percent commission.

The partnerships were made as two things were happening: Apple was preparing the launch of the iPad and Amazon was gaining too much bargaining power, as it had at that time an estimated 90 percent share of the e-book market, the Wall Street Journal explained.

Since Amazon launched the Kindle, it offered newly releases and best sellers at for US$9.99, which worried publishers, who want to sell hardbacks at higher prices. When Apple came on the e-books scene, it offered an "agency pricing" arrangement, in which 70 percent of of the retail price went to publishers, and the rest went to Apple, rather than the seller paying 50 percent to the publisher and then choosing how much of a discount to offer readers. However, under the agreement with Apple, publishers could not sell more cheaply to Apple's rivals, according to the WSJ.

However, according to US Attorney General Eric Holder, this strategy can ultimately increase prices for consumers, making them pay more for the most popular titles.


"Our investigation even revealed that one CEO allegedly went so far as to encourage an ebook retailer to punish another publisher for not engaging in these illegal practices," he said, according to Wireless Week.

Hachette, Simon & Schuster and HarperCollins have already agreed to settle with the Justice Dept., while Penguin was determined to go to court if necessary and Macmillan denied any collusion, responds John Sargent, CEO of MacMillan.


Apple refused to comment.

Peter Pachal from Mashable writes that the winners of the case are Amazon and consumers. The former has the law on its side and the latter can enjoy spending less money. On the other hand, Emily Bell, from The Guardian notes, despite the Justice Dept.'s efforts to protect consumers, the regulators are still unfamiliar with handling the digital world.

Previously, in December 2011, the European Commission also launched an anti-trust case against Apple and four publishers of colluding the retail price of e-books. The publishers were Simon & Schuster, Harper Collins, Hachette Livre and Verlagsgruppe Georg von Holtizbrinck. Last Wednesday, Joaquín Almunia, the EU's competition chief, received their proposals to close the probe and said he is engaged in "fruitful discussions" with the companies, Reuters reported.

 Image: Tech Crunch