The U.S. Justice Department just formally charged Apple, along with book publishers, Hachette, HarperCollins, Macmillan and Penguin in regards to e-book pricing. The DoJ alleges that the companies colluded in anticompetitive practices involving pricing and sales. This comes after a year-long investigation into the matter after Apple switched to an “agency” model where they retained a portion of the sale of e-books sold through its platforms. This is said to have resulted in higher prices industry-wide, since the power to set prices rested in the hands of only a few sellers.
Bloomberg reports that several publishers are seeking to settle with the DoJ. Simon & Schuster, Lagardère SCA’s Hachette Book Group and HarperCollins could settle as soon as today. (Update: They just settled) However, Apple and Macmillan reportedly refused to engage in settlement talks, so far denying the claims. This might get ugly.
With e-book sales rising rapidly, the DoJ is seeking to ensure the consumer isn’t seeing unnecessary price increases caused by this so-called agency model employed by Apple. This model lets the publisher–rather than the vendor–set prices, which is why the big five publishers jumped onboard. Apple just asks for 30% of the end sale.
“Traditional” booksellers like Amazon and Barnes & Noble have stuck to the wholesale pricing model, in which they purchase the rights to a book and set their own price. This often stiffs the publishers as the retailers turn bestsellers into loss leaders, causing them to be undervalued in the publisher’s view. But with Apple, the big five can price books how they see fit. Both sides can be effectively argued as pro-consumer.
Even if the DoJ rules against Apple, its agency business model might stay intact. Apple and the publishers would likely simply have to comply with stringent regulations.
Update: Minutes after the initial report hit, Bloomberg is reporting that Simon & Schuster, Lagardère SCA’s Hachette Book Group and HarperCollins just settled with the DoJ over unspecified terms.