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DOJ Says Apple & Publishers Colluded About E-book Prices

DOJ Says Apple & Publishers Colluded About E-book Prices

This morning, the U.S. Justice Department formally charged Apple and book publishers Hachette, HarperCollins, Macmillan and Penguin for allegedly colluding about e-book pricing and sales. Some of the publishers — News Corp.’s HarperCollins, Simon & Schuster and Hachette — settled their suits today, Bloomberg reports. Apple and Macmillan have so far refused to engage in settlement talks.

As CNET reports, the lawsuit is based on changes about how publishers charge for e-books. When the iPad appeared in 2010, Apple initiated the use of the “agency model,” which allowed publishers to set their own prices for e-books so long as Apple received a 30 percent share and so long as publishers said they would offer their lowest prices through Apple. With the agency model, Apple and publishers have control over the price of e-books.

Under the traditional wholesale model — followed by Amazon and Barnes & Noble — publishers buy the rights to a book for about half the cover price and then set their own price for e-reader devices. This model has often not been to the advantage of publishers as “the retailers turn bestsellers into loss leaders, causing them to be undervalued in the publisher’s view,” says TechCrunch. This pricing model came to light in 2010 when book publishers asked Amazon to increase the price of e-books on its website above $9.99. Amazon refused and, for some time, many popular books from Macmillan were not available on its site.

Both the traditional and the agency models can be “effectively argued as pro-consumer,” TechCrunch notes. The agency model may still remain in place even if the DOJ rules against Apple; the technology giant and publishers would, though, have new and “stringent regulations” to comply with.

There is plenty at stake: E-books generated $969.9 million in sales in 2011, a 117 percent increase from the previous year, says Bloomberg. Bestsellers and new books are now generally priced between $12.99 and $14.99. Amazon has lost market share in selling e-books, going from 90 percent to 60 percent since the agency model was instituted.

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16 comments

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8:24PM PDT on Apr 13, 2012

Dumb-assed U.S. Gov., making Apple the poster child for all of America's ill's. What rubbish!

5:21PM PDT on Apr 12, 2012

I will stick to hardback books.

11:49AM PDT on Apr 12, 2012

"Apple and publishers have control over the price of e-books" OK that's not a monopoly, what's the legal term for two companies working together to control a market


10:35AM PDT on Apr 12, 2012

Sorry Apple and all other ebook publishers, this does not computer. Yes I can understand prices being higher for paperbacks and hardback books. Paper, ink, ,labor, storage, transport, remainders, all cost, over and above what you have paid the author, agent and for advertising and shelf space. These physical books can be lent over and over to friends, neighbors and family and you don't see a dime for it, even through a library.

Then we have ebooks. Outside of the initial cost to digitally master the book, you have no other costs. They are distributed to the sellers or from your own sites. If from a sellers site you don't even have bandwidth charges..yet these books, which rarely can be lent, cost just as much as the physical book. Could somebody PLEASE explain to me why?

8:59AM PDT on Apr 12, 2012

I have an e-reader and the only saving thing about it is that it saves trees. I think paying almost as much for an electronic copy as for a hard copy is ridiculous! There's no cost of printing, etc. Guess it does eliminate the middleman somewhat. E-readers save trees and that's a plus these days.

7:56AM PDT on Apr 12, 2012

The DOJ certainly has it priorities out of order.

7:48AM PDT on Apr 12, 2012

Fiction is good but I'd really like to see more text books as ebooks in the medical, alternative medicine, A&P categories as well as cookbooks. I keep looking but so far there's only one book I desire that's in ebook format.

7:45AM PDT on Apr 12, 2012

Publishers SHOULD be able to set the price they want for their books. If only Apple allows this, then it would be Amazon that was trying to monopolize the market. Monopolies generally try to undersell their competitors, then when they are the only source for a product, they can raise the price to whatever they want. THAT'S a monopoly.

I think Apple should be praised for their fair market approach.

7:28AM PDT on Apr 12, 2012

Informative. Thank you...

7:09AM PDT on Apr 12, 2012

The feds need to go after these large greedy corporations, including the banks, oil companies, etc. for taking advantage of people.

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Kristina Chew Kristina Chew teaches and writes about ancient Greek and Latin and is Online Advocacy and Marketing... more
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