Lawsuit filed against Apple over alleged e-book price fixing

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By a Newsnet reporter
 
The United States Department of Justice has filed a lawsuit against the corporate giant Apple and other named publishers for alleged price fixing of e-books.
 
The suit, which runs to 36 pages and brought under the Sherman Anti-Trust Act 1890 was filed in the Court for the Southern District of New York on the 11 April, alleging that Apple, the world’s most valuable firm, and Hachette, HarperCollins, Macmillan, Simon and Schuster and Penguin ‘conspired to raise retail e-book prices and to otherwise limit competition in the sale of e-books.’

Before the release of Apple’s iPad, Amazon’s Kindle was the market leading e-book reader which in 2007, according to reports, enabled them to force publishers to sell their books well below cost price.

According to the United States Department of Justice the publishers, in an attempt to force Amazon to raise the cost of the e-books, approached Apple in late 2009.  The launch of Apple’s iPad proved to be the ideal platform to achieve this aim

The alleged conspiracy placed the sale of many books under what is known as the ‘agency model’ where publishers set the price of a book and the agent selling it receives a 30% cut.

The agency model was adopted by publishers largely at the prompting of the late Steve Jobs, one which he described as an “aikido move” according to a biography published after his death.

“We were not the first people in the books business,” Mr Jobs told his biographer, Walter Isaacson.

“Given the situation that existed, what was best for us was to do this aikido move and end up with the agency model.  And we pulled it off.”

Sharis Pozen, head of the Department of Justice’s antitrust division, commenting on the filing of the lawsuit at a news conference said:

“This action drove up e-book prices virtually overnight.

“Let me be clear: When companies enter agreements that prevent price competition, that is illegal.”

Hachette, HarperCollins and Simon and Schuster have already settled with the US Department of Justice, requiring them to grant retailers like Amazon and Barnes & Noble the freedom to reduce prices.

However the case will proceed against Apple, Macmillan and Penguin “for conspiring to end e-book retailers’ freedom to compete on price”, a Justice Department spokesperson said, adding that it would “vigorously” pursue its claims against the defendants who chose not to settle.

Meanwhile the European Commission has also been investigating e-book price fixing, although Apple, Hachette, HarperCollins, Macmillan and Simon and Schuster have now made proposals to end it.

The EU’s competition commissioner Joaquin Almunia, commenting on the e-book price fixing scheme said,

“The European Commission has received proposals of possible commitments from Apple and four international publishers.’

Apple, which sells books through its iBooks platform on the iPad and iPhone, has declined to comment.