Department of Justice Sues Apple and Several Publishers Over eBook Prices


(image courtesy mass effect wiki)

(See end for updates)

Huge ebook news this morning! The US Department of Justice has officially filed anti-trust lawsuits against Apple and Hachette Books, as well as some sort of legal action against MacMillan, Harper Collins, and Penguin. All of these charges are related to the Agency Model, where prices are set by the publisher and discounts at the retail level are disallowed.

I am not surprised that it has come to this. All the publishers were very insistent they did not do anything wrong, and that it was purely coincidence that all of them developed the same exact pricing plan at the same exact time, with the same exact terms, all of which happened to have been requested (supposedly) by Apple. Of course. These things happen. It’s just like the guys who just happened to be at a bank with masks and weapons. They didn’t intend to rob anyone, it was just a coincidence they were all there armed to the teeth.

And believe me, this is robbery. The Consumer Federation of America was out at the start of the week urging the DoJ to take anti-trust action, claiming the Agency Model is anti-consumer. It really is, and I am sorry to be so harsh but anyone who tries to tell you otherwise is a liar or someone who works for a publisher. It is not the job of the consumer to prop up businesses in turmoil. It is not the job of the consumer to pay more money because one competitor was deemed “too successful” by everyone else in the industry. It is not the job of the consumer to be used as a pawn to punish Amazon.

The Department of Justice is doing their job, and I am thrilled to see that. The end result may not end up making a difference immediately. Unwinding any contracts deemed illegal will be complex, and it is entirely possible that similar terms will replace the old contracts. The actual “Agency Model” isn’t totally illegal, it’s the part where everyone coordinated (and tried to guarantee no one could undersell Apple) that got the DoJ involved. So don’t pop the good champagne and start celebrating $9.99 ebooks again, at least not yet.

But still, there’s some really satisfying karma in all this…publishers colluded to stop Amazon, claiming Amazon was the evil monopoly…only to get caught in their own anti-trust web!

UPDATE: The Wall Street Journal is reporting that Simon and Schuster, Harpercollins, and Hachette have all settled. No details yet but it appears the settlement included terminating their ebook agreement with Apple. It is unclear what this will do to the rest of their contracts with Amazon, Kobo, and B&N, but we will keep you informed!

Via Engadget and Bloomberg

Categories: eBooks

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9 replies

  1. So does this mean Apple negotiates new contracts with publishers or that the iBook Store will have a far smaller selection?

    • That’s the $64,000 question.

      I think it means both. We will see the settlement publishers pull out of iBooks pending new contracts. I am not sure if Apple will negotiate new contracts until their legal battle with the DoJ is resolved.
      We will have to wait and see. But since Apple is making a piddling amount from iBooks anyway, they may not notice if they lose content.
      If a bookstore drops half their books and no one shops there anyway, does it make a sound? :)

  2. Apparently the DOJ had phone records showing when the CEOs called each other and for how long. No wonder so many of them settled so fast.

  3. Honestly it is about time.

    To look at all of the major online ebook shops and also the online book retailers, and see ANY new release in hardcover have a MSRP with discount price ~$16 – 20, with the ebook version at EXACTLY $14.99 in every store tells me all I ever had to know.

    No discounts, price fixing … pretty obvious.  And Apple really needs to get taken down a peg over this level of arrogance and anti-consumer behavior.

  4. I agree that there was likely collusion and Apple and the others need to knock it off and the DOJ action was the right thing to do, but I also think the DOJ is suspiciously quiet when it comes to the price dumping that Amazon was (and is) doing and that Amazon has regularly exhibited monopolistic practices.  I guess they have really good lobbyists to avoid DOJ action like they have.

    • In what sense? I hear this thrown around a great deal, but can you point to a specific example where Amazon is worse than Target, Best Buy, or Walmart?
      Sent from my iPad

    • Interesting dilemma, but we have to remember that publishers and authors are themselves monopolists – they have exclusive rights to the text for a long, long time. We generally worry about monopolists when they demonstrably hurt consumers; I’m not sure that consumers are hurt when ebook prices are sold by Amazon at $9.99. Of course, if Apple really wants to, they can absorb the loss of ebooks on that price far more easily than Amazon can, and could, in fact, undercut Amazon prices without cutting too far into that $100 billion pile of cash.