Publishers settle in US gov't suit vs Apple, others over ebook pricing

 

"As part of this commitment, the Department has reached a settlement with three of the nation’s largest book publishers – and will continue to litigate against Apple, and two additional leading publishers – for conspiring to increase the prices that consumers pay for e-books," he said.

 

Earlier, the DOJ had filed a lawsuit in U.S. District Court for the Southern District of New York, against Apple Inc. and five book publishers.

 

The lawsuit claimed the companies conspired to stop competition in the price of e-books, mainly as a way to hamper stores selling e-books, by bringing down their prices starting in the summer of 2009.

 

Holder said the companies, during regular, near-quarterly meetings, even discussed confidential business and competitive matters, including Amazon’s e-book retailing practices, as part of a conspiracy to raise, fix, and stabilize retail prices.

 

"In addition, we allege that these publishers agreed to impose a new model which would enable them to seize pricing authority from bookstores; that they entered into agreements to pay Apple a 30 percent commission on books sold through its iBookstore; and that they promised – through contracts including most-favored-nation provisions – that no other e-book retailer would set a lower price," he said.

 

The DOJ investigation even revealed that one CEO allegedly went so far as to encourage an e-book retailer to punish another publisher for not engaging in these illegal practices, he said.

 

Named in the lawsuit were Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster.

 

Of the five, Hachette, HarperCollins and Simon & Schuster agreed to a proposed settlement.

 

"If approved by the court, this settlement would resolve the Department’s antitrust concerns with these companies, and would require them to grant retailers – such as Amazon and Barnes & Noble – the freedom to reduce the prices of their e-book titles.   The settlement also requires the companies to terminate their anticompetitive most-favored-nation agreements with Apple and other e-books retailers," Holder said.

 

Holder said the companies will be prohibited for two years from placing constraints on retailers’ ability to offer discounts to consumers.

 

They will also be prohibited from conspiring or sharing competitively sensitive information with their competitors for five years, he added.

 

"(E)ach is required to implement a strong antitrust compliance program.   These steps are appropriate – and essential in ensuring a competitive marketplace," he said.

 

A separate report on UK's The Register said publishers had been worried about the pricing strategy of Amazon, which was buying ebooks at a percentage of the recommended retail price, but selling them on at a a lower or even less-than-cost price to push sales of its Kindle ereaders and establish a strong market share.

 

Apple entered the picture considering an e-book store for its then-to-be-launched iPad tablet.

 

The Register report quoted the US DOJ as saying Apple hit upon the agency pricing model as a way to do this, where the publishers get to decide the prices and Apple would take a percentage - in this case, 30 percent.

 

"Together, Apple and the Publisher Defendants reached an agreement whereby retail price competition would cease (which all the conspirators desired), retail ebook prices would increase significantly (which the Publisher Defendants desired), and Apple would due guaranteed a 30 per cent commission on each ebook it sold (which Apple desired)," The Register said.

 

It added Apple also got the publishers to put a so-called "most favored nation" clause into the contracts, which stopped them from giving a cheaper price to anyone else.

 

The publishers then took this new model to all other ebook resellers and made them adopt the model, resulting in a price that was higher than what it used to be.

 

US, EC probes

 

The Register said the DoJ and the European Commission have both been investigating allegations of price-fixing between Apple and the publishers for the last few months.

 

Both indicated they would settle if the parties made sacrifices, generally taken to mean that they should rip up their existing contracts.

 

But The Register quoted Apple as saying it did not make sense for it to coordinate with the publishers to protect book sales because it was new to the market and had nothing to do with paper books.

 

Apple also rubbished the idea that Amazon was a threat to it. — TJD, GMA News