The U.S. Department of Justice is readying a lawsuit against Appleand five major publishers over alleged price fixing of e-books,according to a new report. The Wall Street Journal claimed on Monday that the DoJ has warned Apple and the publishers of itsplans to sue them. One of the issues under investigation is Apple's alleged role inconvincing e-book publishers to switch to an agency model from thewholesale model that Amazon had implemented with its Kindle store.Under the old system, publishers would sell their books atwholesale and let the bookseller set its own prices. |
Amazon hadconsistently upset publishers by selling titles at a loss. As Apple readied its iBooks digital bookstore ahead of the releaseof the original iPad in early 2010, Apple CEO Steve Jobs offered toimplement the agency model for its store. The company agreed to letpublishers set prices in exchange for a 30 percent cut and anagreement that prevented other retailers from undercutting them.The publishers then used their deal with Apple as leverage topressure Amazon to switch to the agency model. Simon & Schuster, Hachette, Penguin, Macmillan and HarperCollinsare the publishers that could face legal action from the federalagency.
Random House, the only other Big Six publisher, is notincluded in the investigation because it initially rejected the agency model. Insiders claimed that the Justice Department suspects Apple and thepublishers of violating federal antitrust laws by colluding toraise prices. For their part, the publishers argue that they weretrying to enhance competition with the shift to agency pricing.Some of the publishers are also being investigated over agreementsto delay e-book releases to allow hardcover editions a window ofexclusivity. People familiar with the matter told the Journal that several of the parties involved in the probe have enteredtalks to settle the case in an effort to avoid going to court.However, sources said only some of the publishers are in settlementdiscussions.
One publishing executive told the publication that negotiationswith the DoJ have "taken many turns." Another executive said that asettlement was still a ways off. The Justice Department lawsuit would come on the heels of a class-action lawsuit filed last year. A group of consumers have accused Apple and the publishers of engaging in an e-book "price-fixingconspiracy" that resulted in price hikes. The complaint draws uponcomments made by Jobs to his biographer about the move to theagency model for iBooks as evidence of the alleged collusion.
The European Commission began investigating Apple and the publishers late last year. Apple also faced an anticompetitive inquiry from the Connecticut Attorney General in 2010. Apple redoubled its e-book efforts in January with the release of iBooks 2 . The company is looking to tap the education market by providinglow-cost interactive digital textbooks as alternatives totraditional textbooks.
The iPad maker also released iBooks Author,a free tool for creating e-books for the iBookstore,.
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