THE US GOVERNMENT sued Apple and five major book publishers yesterday for colluding to fix the prices of e-books in a fight against growing competition from Amazon.
The lawsuit filed in a New York district court accused Apple and publishing executives of “devising schemes” to limit Amazon’s ability to discount e-books after the online retailer’s success at selling popular titles for just $9.99.
It alleges that publishers Hachette Book Group, part of Lagardere; HarperCollins, owned by News Corp; Holtzbrinck, owner of Macmillan; Simon & Schuster, a CBS subsidiary; and Penguin, owned by Pearson, had agreed to switch to an “agency” business model where publishers – rather than retailers – set “significantly higher” prices for e-books.
The agreement between the firms, which came as Apple prepared to launch its first iPad in 2010, also guaranteed the technology giant a 30 per cent commission on each e-book sold.
“Apple facilitated the publisher defendants’ collective effort to end retail price competition by coordinating their transition to an agency model across all retailers”, said the complaint, which was filed by the antitrust division of the US department of Justice (DoJ).
US attorney-general Eric Holder claimed at a press conference yesterday that top executives would meet on a regular basis to discuss “confidential business and competitive matters – including Amazon’s e-book retailing practices” as part of a conspiracy to raise retail prices.
Holder said that as a result of this alleged conspiracy “we believe that consumers paid millions of dollars more for some of the most popular titles”.
Hachette, HarperCollins and Simon & Schuster immediately settled with the DoJ, which will continue to pursue its case against Apple, Macmillan and Penguin.
This settlement prevents the publishers from making any further price-fixing agreements with Apple and other e-book retailers.
A spokesperson for the DoJ said Apple, Macmillan and Penguin had refused to engage in settlement talks.
Apple and Penguin could not be reached for comment. Macmillan chief executive John Sargent denied in an open letter yesterday that the publisher had conspired to raise prices.
Meanwhile, a separate lawsuit was filed in Texas by several US states against the same publishers for similar price fixing claims. The states reached an agreement with Hachette and HarperCollins, who will together pay up to $52m in damages.