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U.S. Justice Department sues Apple for alleged e-book price-fixing

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After months of investigation, the U.S. Department of Justice today brought a lawsuit against Apple and five major U.S. book publishers alleged e-book price-fixing, reports Bloomberg. The potential move comes just a month after the Wall Street Journal reported that the DoJ was preparing its case against the iPhone and iPad maker.

Also involved in the antitrust lawsuit are book publishers Simon & Schuster, Penguin, Macmillan, HarperCollins, and Hachette. According to earlier reports, the crux of the issue revolves around the publishing industry’s switch from a “wholesale model” to an “agency model” in determining the price of e-books.

Most printed books are sold through the wholesale model, which allows individual booksellers to set the price of books. Under this model, Barnes & Noble might sell a copy of a book for $20, while an independent bookstore might mark it down to $18, for example. The agency model works entirely differently, by allowing publishers to set a fixed price for books, so they sell for the same amount, no matter the seller.

When Apple first introduced the iPad in 2010, then-CEO Steve Jobs convinced the aforementioned book publishers to sell their e-books under the agency model. Through this deal, Apple would receive 30 percent of the proceeds from selling e-books through its iBookstore, and the publisher would receive the rest. The problem is, Apple also allegedly convinced the publishers to not allow other e-booksellers, like Amazon, to sell the books at a lower price, hence the price-fixing allegations.

The U.S. government isn’t the only party questioning the legality of this deal. Late last year, the European Commission launched its own investigation into the matter.

Update: According to the DoJ, Hachette, HarperCollins, and Simon & Schuster have agreed to a settlement. The settlement, the details of which are not yet known, must still be approved by the court.

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