The US Department of Justice has filed a lawsuit against Apple and five publishers over a conspiracy to fix retail prices of eBooks, which it claims “drove up e-book prices virtually overnight”.
The department is concerned that consumers have paid millions of dollars more for some of the most popular e-book titles, as a result of the alleged conspiracy.
The lawsuit against the iPad manufacturer also covers the publishers Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster.
Three of these publishers Hachette, HarperCollins and Simon & Schuster have agreed to a proposed settlement. If approved by the court, this settlement would require them to grant retailers such as Amazon the freedom to reduce the prices of their e-book titles and to terminate agreements that favour Apple and other e-books retailers.
The companies will also be prohibited for two years from placing constraints on retailers’ ability to offer discounts to consumers and from conspiring or sharing competitively sensitive information with their competitors for five years.
The department alleges that from the summer of 2009, executives in the companies covered by the lawsuit responded to online retailers’ ebook price reductions by agreeing to work together to eliminate competition among stores, ultimately increasing prices for consumers.
The department accuses the companies it filed the lawsuit against of discussing confidential business and competitive matters including Amazon’s e-book retailing practices.
It also alleges that the publishers entered into agreements to pay Apple a 30 per cent commission on books sold through its iBookstore and promised that no other e-book retailer would set a lower price. It says the investigation even revealed that one publisher’s chief executive allegedly went so far as to encourage an e-book retailer to punish another publisher for not engaging in these “illegal practices”.
The department has suggested that the publishers’ target was what they referred to as the “wretched $9.99 price point”. One executive was reported as saying that, “the goal is less to compete with Amazon as to force it to accept a price level higher than 9.99.”
The department said it will continue to litigate against Apple and the other two publishers for conspiring to increase the prices that consumers pay for e-books.
Attorney General Sharis A Pozen said the action represented “a true global enforcement effort” with US state attorneys generals and the European Commission also involved.
He added that it was important to take action in the early stages of this emerging technology of electronic books.
“Ensuring an open and competitive marketplace allows for innovation, which is good for businesses participating in that marketplace and is good for consumers.
“We believe the proposed settlement involving the three publishers – Hachette, HarperCollins and Simon & Schuster – will begin to undo the harm caused by the companies’ anticompetitive conduct, and will restore price competition so that consumers can pay lower prices for their e-books.”