The Department of Justice has warned Apple, Inc. and five of the largest book publishers that it plans to file an antitrust lawsuit against them for colluding to raise the price of electronic books. According to the Wall Street Journal, several of the parties are in discussions with the DOJ to settle the case before it goes to court, but not all of the parties are engaged in the discussions. The publishers named in the WSJ report include Simon & Schuster Inc., Hachette Book Group, Penguin Group, Macmillan and HarperCollins Publishers Inc.
Steve Jobs apparently convinced the publishers to change the way they were selling ebooks, and instead move to an agency model where Apple would get 30% of the price. He insisted that they could not allow other retailers to sell the same books for lower prices than Apple was selling it for.
The DOJ believes Apple and the publishers colluded to raise the price of the eBooks which made it hard for Amazon and Barnes and Noble to compete.
The case centers on Apple's move to change the way that publishers charged for e-books as it prepared to introduce its first iPad in early 2010. Traditionally, publishers sold books to retailers for roughly half of the recommended cover price. Under that "wholesale model," booksellers were then free to offer those books to customers for less than the cover price if they wished. Most physical books are sold using this model.
To build its early lead in e-books, Amazon Inc. sold many new best sellers at $9.99 to encourage consumers to buy its Kindle electronic readers. But publishers deeply disliked the strategy, fearing consumers would grow accustomed to inexpensive e-books and limit publishers' ability to sell pricier titles.
To build its early lead in e-books, Amazon Inc. sold many new best sellers at $9.99 to encourage consumers to buy its Kindle electronic readers. But publishers deeply disliked the strategy, fearing consumers would grow accustomed to inexpensive e-books and limit publishers' ability to sell pricier titles.
Steve Jobs apparently convinced the publishers to change the way they were selling ebooks, and instead move to an agency model where Apple would get 30% of the price. He insisted that they could not allow other retailers to sell the same books for lower prices than Apple was selling it for.
"We told the publishers, 'We'll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that's what you want anyway,'" Mr. Jobs was quoted as saying by his biographer, Walter Isaacson.
The publishers were then able to impose the same model across the industry, Mr. Jobs told Mr. Isaacson. "They went to Amazon and said, 'You're going to sign an agency contract or we're not going to give you the books,' " Mr. Jobs said.
The publishers were then able to impose the same model across the industry, Mr. Jobs told Mr. Isaacson. "They went to Amazon and said, 'You're going to sign an agency contract or we're not going to give you the books,' " Mr. Jobs said.
The DOJ believes Apple and the publishers colluded to raise the price of the eBooks which made it hard for Amazon and Barnes and Noble to compete.