Department of Justice Plans to Sue Apple, Publishers Over E-Book Pricing
The Justice Department has warned Apple and five publishers that it plans to sue them for colluding to raise e-Book prices, according to the WSJ.
The five publishers facing a potential suit are: Simon & Schuster, Hachette Book Group, Penguin Group, Macmillan, and HarperCollins Publishers Inc. Some of these publishers are reportedly in talks to find a settlement.
The case involves the Apple led change of the e-Book industry from the "wholesale model" to the "agency model". The "wholesale model" was where publishers sold books for about half the price to retailers leaving them free to charge any price they wanted. The "agency model" lets publishers decide the price of e-Books and retailers get a cut.
As part of the change to the "agency model" Apple stipulated that publishers couldn't let rival retailers sell the same book at a lower price.
"We told the publishers, 'We'll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that's what you want anyway,'" Steve Jobs was quoted as saying in his biography.
Publishers were then able to force retailers into that model. "They went to Amazon and said, 'You're going to sign an agency contract or we're not going to give you the books,' " said Jobs.