Apple and five book publishers have been warned of a pending lawsuit from the U.S. Justice Department, which believes these companies colluded to keep e-book prices high, reports the Wall Street Journal.
Apple's notorious desire for control is getting it into
trouble again, this time for allegedly colluding to raise the prices of
e-books. Prosecutors are also accusing several large publishing houses of being
part of the scheme.
Suspecting such collusion, the U.S. Justice Department has
warned Apple and five of the largest U.S. book publishers Simon &
Schuster, Hachette Book Group, Penguin Group, Macmillan and HarperCollins
Publishers that it plans to file an antitrust suit against them. News of
the pending suit has quickly led to talks, in the interest of avoiding a court
debacle, the Wall
reported March 8, though an unnamed publishing executive
told the Journal that "by no means are we close [to a settlement]."
The Journal explains that publishers generally sell books to
retailers for half of the suggested retail price. It's up to the retailer to
decide whether to sell at the suggested price or at a discount though still
at a profit.
Before the introduction of the first iPad, Steve Jobs,
Apple's late CEO, reportedly had the idea of instead using an "agency
model," in which the publishers set the price for a book and Apple takes a
30 percent piece of that as it does in its app store, for example.
According to Jobs' biographer Walter Isaacson, Jobs told
publishers, "Yes, the customer pays a little more, but that's what you
want anyway." He also insisted that publishers couldn't let rival
retailers sell the same book at a cheaper price.
Jobs added that the publishers then went to Amazon and told
them, "'You're going to sign an agency contract, or we're not going to
give you the books.'"
The Justice Department is reportedly also unhappy about the
practice of "windowing" books. When it was worried that inexpensive
e-books would affect sales of hardcovers, Simon & Schuster, HarperCollins
and Hachette agreed to delay the release of the certain e-books for a specified
time after the hardcover's
"The publishers have denied acting jointly to raise
prices," the Journal reported. "They have told investigators that the
shift to agency pricing enhanced competition in the industry by allowing more
electronic booksellers to thrive."
The report adds that the European Union is also looking into
the matter, that several class action lawsuits against Apple have been filed in
a New York Federal court, and that Apple has moved to dismiss the case, arguing
that it didn't "coordinate" with the publishers.
"Apple's entry created new competition in eBook
distribution and a vastly larger pool of e-book consumers," it wrote in
In an Oct. 2011 Boston.com
article, Forrester Research analyst James McQuivey said that Forrester
surveys have found 49 percent of iPad owners to be using the tablets for
the iPad is a blockbuster device," McQuivey said, "it doesn't
necessarily lead to book reading for even a majority of its owners."
McQuivey added that "Apple's effect on books so far has not approached its force in the
music business," and that book lovers who likely already have a
relationship with Amazon are likely to continue that relationship with their
e-book purchases, rather than through Apple's iBookstore. In January, Apple announced its entry into the textbook market as well,
introducing iBooks Author
, a free app that enables textbook authors and publishers to create
books and offer them through Apple which gets a 30 percent cut. Conservatively,
it's said to be a market that could bring in a billion a year.