Apple sued over collusion with publishers on e-book pricing

Though tech giant Apple may have made history by hitting the $600 billion mark in market value yesterday that hasn’t stopped the US Department of Justice taking the company as well as major publishers to task regarding the pricing of e-books.

With such devices as the iPhone and iPad and the Apple service, iBooks, e-books have become increasingly popular and very much like their real world counterparts come with a price tag. But the Department of Justice alleges that the pricing of these e-books that are being sold and used by Apple users has not been done fairly, with consumers paying “millions more” than they should have. According to papers filed by the Department of Justice at the Southern District Court of New York, Apple is accused of collusion with publishers Hachette, HarperCollins, Macmillan, Simon and Schuster and Penguin for increasing the prices of e-books. The lawsuit in particular addresses the ‘agency model’ that Apple and the publishers have adopted which sees publishers rather than retailers determine the price of the e-books.

According to Attorney General Eric Holder, "As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles.”

The lawsuit filed further detailed the allegations, "To effectuate their conspiracy, the publisher defendants teamed up with defendant Apple, which shared the same goal of restraining retail price competition in the sale of e-books. Apple facilitated the publisher defendants' collective effort to end retail price competition by coordinating their transition to an agency model across all retailers."

The agency model that Apple had adopted, described by late founder, Steve Jobs as an “aikido move” which he insisted to all the publishers working with Apple, is different from the usual sale of books as the pricing of the latter simply involves the publisher putting a wholesale price on a book with the retailer then selling the book at whatever price they choose. The agency model on the other hand lets the publisher decide the final selling price with the agent that sells them, in this case Apple getting a 30 per cent cut.

In response to the lawsuit, the publishers Hachette, HarperCollins and Simon and Schuster seem to have settled with Hachette commenting it was "confident that we did not violate the anti-trust laws" but said it had "reluctantly" agreed to the settlement. Of course the Department of Justice will still be pursuing its case against Apple and the remaining publishers. Chief executive of MacMillan, John Sargent said, “the terms the DOJ demanded were too onerous” and that these would allow Amazon "to recover the monopoly position it had been building before our switch to the agency model". Apple declined to comment but it was learnt that they as well as the other publishers are seeking to settle the lawsuit.