backtop


Print 20 comment(s) - last by ajcarroll.. on Mar 12 at 3:59 PM

Apple and five book publishers were using an agency sales model that raised the prices of e-books

The U.S. Department of Justice (DOJ) is planning to launch a lawsuit against Apple and five U.S. publishers for allegedly conspiring to raise e-book prices through an agency sales model.

Last December, the European Commission opened a formal antitrust investigation into whether five international e-book publishers had been practicing anti-competitive tactics with the help of Apple and its e-book store iBooks. Shortly after, the U.S. Justice Department climbed aboard the investigation as well.

After investigating the suspicious tactics, the DOJ has now warned Apple and the five book publishers that it plans to sue them for raising the prices of e-books. The five book publishers involved are Hachette Livre (Lagardère Publishing France), Harper Collins (News Corp., U.S.A.), Simon & Schuster (CBS Corp., U.S.A.), Penguin (Pearson Group, United Kingdom) and Verlagsgruppe Georg von Holzbrinck (owner of inter alia Macmillan, Germany).

Traditionally, publishers sell physical books to retailers for about half of the cover price, which is considered a wholesale model. Retailers then had the power to sell those books to customers for a lower price if they wanted to.

However, the e-book industry rocked this model and rubbed publishers the wrong way. Amazon started selling best sellers for as low as $9.99 in an effort to encourage Kindle sales. When Apple came along with iBooks, publishers were worried that the tech giant would take over the book industry the way it did the music industry with iTunes.



Apple then struck a deal with publishers in 2010, where they'd settle on an agency model instead. The agency model allowed publishers to set the price of the book and Apple would receive a 30 percent cut. However, publishers were not allowed to let rivals sell the same book for a lower price.

According to the DOJ, Apple and the five publishers did this to raise the prices of e-books, which violates federal antitrust laws. The publishers reacted to these claims, saying that the agency model was used to "enhance" competition in the e-book industry by helping e-book sellers to make some money out of the deal.

The DOJ isn't buying this excuse, though. The government is wondering how competition could have increased when prices were increasing.

Apple, the publishers and the DOJ are currently in talks regarding e-book prices. While the DOJ warned Apple and the publishers that it plans to sue them for allegedly conspiring to raise prices, some publishing executives associated with the talks have said that a settlement is being considered. Some solutions that have been passed around included the idea to keep the agency model, but allow booksellers to offer some discounts.

Apple has jumped heavily into the book selling and publishing business with the recent launch of iBooks 2, which is the sequel to the iBooks app that provides students with books they need as well as study features, and iBook Author, which is Mac software that allows textbook writers and publishers to create textbooks for the iPad.

Undoubtedly, e-books are an essential part of the iPad experience, and with the announcement of the iPad 3 release just yesterday, Apple likely wants to get this DOJ business figured out quickly.

Sources: Reuters, The Wall Street Journal



Comments     Threshold


This article is over a month old, voting and posting comments is disabled

RE: About Time!
By name99 on 3/8/2012 2:43:06 PM , Rating: 0
quote:
Blame Apple for choosing a particular business model, but the publishers are the scumbags here.


This is precisely the point.
Apple doesn't give a damn about the details of pricing --- it is in the iPad selling business, not in the book selling business. They'd be just as happy if the price of eBooks was half what it is today.They'd be perfectly happy with a model that allows one to return "used" eBooks for resale (ie a kind of rental market, only without a pre-determined time limit). Apple aren't the one's who tripled the prices of eBooks to libraries last week. etc etc.
Apple is in the business of making iPads more useful --- you have to keep remembering that.

How did this go down? Apple spoke to the publishers, the publishers said we will only sell eBooks through the iBook store if you follow this model, so Apple said yes. What else could they do? That's Mafia bargaining.
If anything, depending on how this trial goes, you'll see Apple on the other side, happily telling DoJ exactly how the negotiations went down, and perhaps even suing the publishers for using unconscionable means to force it into a particular business relationship.


"Folks that want porn can buy an Android phone." -- Steve Jobs














botimage
Copyright 2014 DailyTech LLC. - RSS Feed | Advertise | About Us | Ethics | FAQ | Terms, Conditions & Privacy Information | Kristopher Kubicki