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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

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RE: About Time!
By GotThumbs on 3/8/2012 2:43:00 PM , Rating: 5
Apple still demands it's 30% cut, so prices may be raised to cover Apples cut and still make the profit the publishers were looking for. In the end...its the Apple fans who pay.

Apple is/has created a closed Eco-system where consumers have ZERO alternatives and can ONLY purchased through Apples portal.

I think over time.... Steve Hobs cult will breakdown as followers get tired of getting gouged time and time again.

RE: About Time!
By name99 on 3/8/2012 2:49:02 PM , Rating: 2
Apple is/has created a closed Eco-system where consumers have ZERO alternatives and can ONLY purchased through Apples portal.

I'm sorry, but do you know anything about eBooks on iOS?
You can read eBooks from Kindle on iOS. You can read eBooks from Google Books. You can read them from various small vendors, or from Project Gutenberg. (Do a search for eBook in the App Store to see just how many).
You can buy PDFs from technical societies (eg IEEE) and read those.

And, of course, you can read free PDFs, free text files, free MS Word files, etc etc--- all the usual ways to spread free written material.

Regardless of your opinion of Apple or the publishers in this case, you're not helping anyone by stating claims that have absolutely zero relationship in fact.

RE: About Time!
By Boze on 3/12/2012 11:29:05 AM , Rating: 1
LOL! No they won't! Have you been drinking the Anti-Kool Aid??

People will imitate whatever they think is "cool" so they can be part of the "in crowd", so they too can be cool, while failing to reason that genuinely "cool" people don't give a shit what the hoi polloi beneath them think... that's what makes them "cool" in the first place.

I've tried to express this to my baby sister in the past, who used to go around wearing the "cool" clothes, the "cool" shades, buying a "cool" iPod nano. In fact, the only thing she has bought in the past that wasn't "cool" is a Galaxy S phone... and those are cool now.

She finally came to terms with it when I came home for Christmas holidays 2 years ago and I went out with her and her friends to clubs and all her friends kept telling her, "Your big brother is really cool!" She was floored. She told me the next day what they were saying, and that she didn't understand why they thought I was cool. I told her its simple... I don't give a damn what anyone thinks about me. I dress how I want, I act how I want, I do what I want. That's why they think I'm cool, because I'm not doing what everyone else is doing to be "cool".

Same for these Apple zealots. You're "cool" if own an Apple. People are stupid, and they fall for marketing. Brands don't make you cool. Your style and attitude make you cool. Its a real shame people think some product they can buy will make them "cool".

"We shipped it on Saturday. Then on Sunday, we rested." -- Steve Jobs on the iPad launch

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