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U.S. Department of Justice Sues Apple, Publishers Over E-Book Price Fixing

U.S. Department of Justice Sues Apple, Publishers Over E-Book Price Fixing

The U.S. Department of Justice has filed an antitrust lawsuit against Apple and five publishers (Hachette SA, HarperCollins, Macmillan, Penguin, and Simon & Schuster), reports Bloomberg, claiming that Apple and the publishers are engaging in price-fixing and forcing price increases.

The issue surrounds the agency model that Apple introduced in 2010 when the introduced the iPad. The agency model lets publishers set their own pricing for the iBookstore, with Apple taking a 30% cut. The bit that the DOJ worries about, however, is that Apple also demands that the same content cannot be offered anywhere else for a lower price.

Amazon, on the other hand, uses a wholesale model – they pay a flat price for their e-books, and control the pricing themselves. However, due to pricing set by publishers in Apple’s iBookstore, this has apparently forced price increases at Amazon and other venues, who would ordinarily be able to offer the e-books at a lower price.

The government is seeking a settlement that would let Amazon and other retailers return to a wholesale model, where retailers decide what to charge customers, the people said. A settlement could also void so-called most-favored nation clauses in Apple’s contracts that require book sellers to provide the maker of the iPad with the lowest prices they offer competitors, the people said.

Of the six parties involved, Apple, Macmillan, and Penguin have all refused to settle to avoid legal costs, choosing to take the battle to court rather than give up without a fight. The Justice Department has been investigating Apple on the matter since December of last year.

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