Apple, Publishers Sued By Department Of Justice For E-Book Price FixingBy: Shaylin Clark - April 11, 2012
UPDATE: Bloomberg is now reporting that Simon & Schuster, HarperCollins, and Hachette have, in fact, agreed to settle out of court. There are no details of the settlement as yet.
Earlier this morning we brought you news that the U.S. Department of Justice might file suit against Apple and several book publishers for e-book price fixing. Now it looks like that suit has actually been filed.
According to a report from Bloomberg, the DOJ has filed suit against Apple and all five of the publishers listed in the original investigation: Simon & Schuster, Hachette, Penguin, MacMillan, and HarperCollins. The suit alleges that the agreements between Apple and the publishers made prior to the launch of the original iPad and iBooks in 2010 constitute price-fixing, in violation of U.S. antitrust laws.
According to the report, three of the five publishers – Hachette, HarperCollins, and Simon & Schuster – are seeking to settle the case out of court, while Apple, Penguin, and MacMillan are all preparing to fight the lawsuit. Requests for comment sent to Apple and the five publishers have not yet been answered. Citing “two people familiar with the matter,” Bloomberg says that the settlements could come later today.
The government is seeking to nullify the agreements between Apple and the five publishers that instituted an agency model of e-book sales. Under the agency model, publishers set the price of e-books, and the retailer gets 30% of the price. Under the previous wholesale model, e-books were sold in the same way as physical books: the books are sold to the retailer by the publisher, and the retailer is allowed to set whatever price they choose. This model caused concern for publishers because Amazon was selling e-books at or below wholesale in order to drive sales of their Kindle e-reader, a practice which Barnes & Noble also adopted when they released their own Nook e-reader. The government alleges that by adopting the agency model, Apple and the publishers colluded to raise e-book prices. Once the agency model agreements with Apple were in place, the publishers were able to strong-arm Amazon and Barnes & Noble into similar agreements.