According to The Wall Street Journal, Apple will face an antitrust lawsuit from the US Department of Justice. The allegations leveled against Apple are tantamount to price fixing; the Justice Department’s suit claims that Apple conspired with five national publishers to restrict competition and artificially inflate the price of e-books. The lawsuit contends that these practices “have caused e-book consumers to pay tens of millions of dollars more for e-books than they otherwise would have paid.”
At issue is an agreement between Apple and major publishing houses in which publishers could set the price of their e-books on Apple’s iBookstore, provided that A) Apple receives a 30% “commission” on each sale and B) the publishers agreed not to sell their content to other distributors for less money. This agreement is known as the agency model.
It proved an attractive option for publishers who had watched as Amazon drove down the price of e-books prior to the 2010 release of the iPad. Amazon had been content to sell the e-books at a loss in order to drive sales of its Kindle and Kindle Fire hardware. Amazon now claims that the alleged price-fixing agreement between Apple and several major publishing houses has unfairly impeded its ability to compete in the e-book market.
Three of the publishers involved in the case—Simon & Schuster, HarperCollins, and Hachette Book Group—are expected to reach a settlement with the Justice Department relatively soon.
Attorney General Eric Holder will hold a press conference on Wednesday to discuss “a significant antitrust matter.”
The Wall Street Journal’s report can be found here.
It is perhaps not surprising that, as the e-book market continues to expand and publishers and other distributors look to take advantage of that medium’s unique commercial characteristics, businesses have run afoul of the justice system, which is itself struggling to keep up with the pace of innovation. It also seems as if the Justice Department will look to maintain traditional standards of competitive integrity as giants like Apple and Amazon continue to break new technical and commercial ground.