Reports say that Apple and five major book publishers may be sued by the U.S. Department of Justice for conspiring to raise e-book prices.
The U.S. Department of Justice allegedly told Apple and five of the nation's largest publishers that it will sue them for colluding to raise e-book prices.
While some of the companies have tried to stop an antitrust case from going to court by reaching a settlement, it appears to be unsuccessful, the Wall Street Journal reported and relied on unnamed sources. If the case is settled out of court, it could mean huge changes in pricing for the industry and maybe cheaper e-book prices.
The five publishers: 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., Apple and the Justice Department declined to comment on the story.
According to MediaShift, most of the alleged collusion came about to battle Amazon and its competitive pricing. Publishers wanted Amazon to adhere to the "agency model" of pricing e-books the same as regular books rather than Amazon's signature $9.99 pricing. Apple's alleged interest was in benefiting by hurting Amazon's e-book profits.
According to the WSJ, the late Steve Jobs met with publishers to discuss using the agency model at the Apple iBookstore and asked that they not let rival retailers sell at a lower price. The exchange was found in Jobs' biography by Walter Isaacson.
The publishers were then able to impose the same model across the industry, Mr. Jobs told Mr. Isaacson. "They went to Amazon and said, 'You're going to sign an agency contract or we're not going to give you the books,' " Mr. Jobs said.
If the allegations are true, then it's a pretty cut-and-dried case. Apple wanted to hurt Amazon, publishers wanted more money, and both were happy about the outcome. The only negative? Consumers paid a lot more money for e-books than we should have.