The U.S. Department of Justice is reportedly preparing to file suits against Apple and five publishers for allegedly colluding to fix the prices of e-books. The story was first reported by The Wall Street Journal citing anonymous sources; the publishers apparently to be named in the suits are Hachette, Simon & Schuster, Penguin, Macmillan, and HarperCollins.
The Justice Department launched a formal investigation into Apple’s e-book pricing back in December 2011, immediately on the heels of the European Commission launching a formal inquiry on the same matter. The issue is the e-book industry’s switch from a wholesale model (where the price of books is set by booksellers) to an agency model (where the price of books are set by publishers). An agency model helps ensure that the pricing of e-books is consistent across platforms: the electronic version of a book will likely have the same price across Amazon’s Kindle platform, Google’s “Play Books,” the Sony Reader store, Barnes & Noble, Apple’s iBookstore, or other e-book retailers. However, the agency model also therefore discourages competition, since booksellers can’t attempt to woo customers by offering lower prices than their competitors.
Both the Justice Department and Apple have declined to comment on the report of pending suits
(See Understanding the EU’s antitrust inquiry into Apple’s iBookStore for background and more detail on e-book pricing models.)
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