Gloves are off, U.S. sues Apple, publishers over ebook pricing ‘conspiracy’

April 11, 2012
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In a press conference, U.S. Attorney General Eric Holder also announced that three other publishers, who were also being investigated in the case, have settled. The government claims the conspiracy started in 2010 shortly before the introduction of the iPad. 

The lawsuit includes a comment by the late Apple CEO Steve Jobs about his company’s strategy for negotiating with publishers: 

"We'll go to [an] 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."

The government’s case centers on the belief that Apple and the publishers united to fight Amazon’s practice of selling ebooks for as little as $9.99 by switching to an “agency” model that let publishers set the price of the ebooks and Apple would be guaranteed a 30% commission on each e-book sold.

"To effectuate their conspiracy, the publisher defendants teamed up with defendant Apple, which shared the same goal of restraining retail price competition in the sale of e-books," the Justice Department complaint said.

According to Reuters, Apple has not been part of the settlement negotiations. In addition to Apple, the Justice Department plans to proceed with its suit against Pearson Plc's Penguin Group and Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH. The European Union is also investigating the alleged price-fixing between Apple and publishers.

News Corp's HarperCollins Publishers, CBS Corp's Simon & Schuster and Lagardere SCA's Hachette Book Group agreed to settlement terms that includes terminating their agreements with Apple in regards to e-books and to stop limiting any retailer's ability to set e-book prices for two years, according to a report in the Wall Street Journal that notes the move will help Amazon resume deep discounts on new ebooks. 

"This is a big win for Kindle owners, and we look forward to being allowed to lower prices on more Kindle books,” Amazon said in a statement. 

Macmillan CEO John Sargent said in a letter made public on Wednesday that settlement terms demanded by the Justice Department "were too onerous." He also said Macmillan did not act illegally and did not collude.

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