The US Justice Department has reportedly warned Apple, Inc. and five of the nation’s leading publishers that it plans to take legal action against them for allegedly colluding to raise the price of e-books. The publishers include Pearson, Macmillan, Hachette Book Group, Simon & Schuster and HarperCollins.
According to media reports, several of the parties have held talks to settle the antitrust case and head off a potentially damaging court battle. If successful, such a settlement could have wide-ranging consequences for the industry, potentially leading to cheaper e-books for consumers. However, not all publishers are in this settlement discussions.
The Justice Department believes that Apple and the publishers acted in concert to raise prices across the industry, and is prepared to sue them for violating federal antitrust laws. Publishers have, however, denied acting jointly to raise prices. They have told investigators that the shift to agency pricing enhanced competition in the industry by allowing more electronic booksellers to thrive.
William Lynch, chief executive of Barnes & Noble, gave a deposition to the Justice Department in which he testified that abandoning the agency pricing model would effectively result in a single player gaining even more market share than it has today.
Among the issues that the Justice Department has examined is the effort by three publishers involved in the probe to ‘window’ e-books in late 2009.
For publishers, digital-book revenue is still the fastest-growing segment of the business at a time when the sale of physical books is on a decline. E-book sales more than doubled to $970 million in 2011, according to a survey of 77 publishers conducted by the Association of American Publishers. As more consumers migrate to dedicated e-readers and tablet reading devices, the number of consumers reading digitally will likely increase.
It isn't the first time the Justice Department has taken action against Apple for allegedly colluding with other companies. In 2010, several technology companies agreed to settle allegations that they colluded to hold down wages by improperly agreeing not to poach each other's employees.
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