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Justice Department Files Antitrust Suit Against Apple for eBook Pricing
Today the US Justice Department filed an antitrust lawsuit against Apple and five major book publishers over the pricing of eBooks. The Justice Department claims that Apple and the other publishers named in the suit colluded to fix eBook prices, causing “e-book consumers to pay tens of millions of dollars more for e-books than they otherwise would have paid.” The book publishers teamed up with Apple in an effort to topple Amazon’s $9.99 Kindle ebook, and now they’re all in big trouble.
Traditionally, retailers — not publishers — set the prices for books. But with Apple’s iBooks “agency model,” publishers are able to set the price, and Apple takes 30 percent of the sale price (a higher commission than other retailers typically demand). Apple’s contracts with publishers also include a “most favored nation clause,” which says that no other retailer can sell eBooks for a lower price. Publishers saw this as a way to put pressure on Amazon to raise the prices on its eBooks.
Three of the publishers named in the suit — HarperCollins, Simon & Schuster and Hachette Book Group — have already agreed to a settlement, according to the New York Times, but Apple, which denies that it colluded to raise prices of eBooks, has refused to engage in settlement talks so far. The settlement requires the publishers terminate their ebook contracts with Apple and any retailer with a “most favored nation clause,” according to the New York Times.
Today’s biggest winner is of course Amazon. Because of its sheer size, Amazon should be able to sell eBooks for lower prices than any other publisher, and there is widespread concern in the publishing community that it will regain the near monopoly it had before the launch of the iPad. Amazon spokesman Andrew Herdener basically said as much in a statement today: “This is a big win for Kindle owners, and we look forward to being allowed to lower prices on more Kindle books.”
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