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Apple is not part of the settlement talks with DOJ

The U.S. Department of Justice (DOJ) could sue Apple this week over allegations regarding raised prices of e-books via an agency sales model.

Last December, the European Commission opened a formal antitrust investigation into whether five international e-book publishers had been partaking in anticompetitive practices with the help of Apple and its e-book store iBooks. The five e-book publishers include 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 ability to sell those books to customers for a lower price if they wanted to.

But when e-books came along, this model was challenged. Amazon started selling best sellers for as low as $9.99 to encourage its Kindle e-reader sales. Publishers were not happy.

Apple then came along with iBooks, and publishers began to worry that it would take over the book industry the way Apple's iTunes took over the music industry, where customers would choose to purchase cheap, digital books instead of physical books.

However, Apple struck a deal with publishers in 2010. An agency model was implemented, where publishers were allowed to set the price of a book and Apple would take a 30 percent cut. The only restriction was that publishers were not allowed to let rivals sell the same book at a lower price.

This model helped Apple because its original iPad launch occurred in 2010, which was coupled with iBooks. To assure a successful launch of the device, DOJ believes Apple cut the agency model deal with publishers, which turned out to be an anticompetitive move.

After the European Commission opened an investigation of this agreement, DOJ climbed aboard as well. After looking further into the situation, DOJ threatened Apple and the five publishers with a lawsuit just last month for allegedly conspiring to raise prices, which violates federal antitrust laws.

Now, DOJ may sue Apple as soon as today while still working to reach a potential settlement with the five publishers, according to Reuters. Nothing has been set in stone, but DOJ does plan to pursue Apple.

Source: Reuters

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By DrApop on 4/11/2012 1:29:41 PM , Rating: 2
So what does "settlement" mean? Does that mean they still can operate using the agency model or is the agency model done away with?

Or does the suit center around the collusion with Apple rather than the agency model itself?

Either way it sounds like the government is going to make money from this while the consumer will still have to pay the high prices for ebooks.

Either way, I haven't paid over $9.99 for an ebook and I won't. The big publishers have lost my complete business by jacking up the prices. While I do miss reading several authors who publish with the big publishers, there are thousands upon thousands of terrific ebooks out there that are priced just right rather than the rip-off price.

RE: Settlement???
By ritualm on 4/11/2012 1:59:19 PM , Rating: 2
It means they merely have to pay a fine and be able to walk away without admitting any wrongdoing on their part. If they get sued and they lost, the fines get a lot bigger because they are then found guilty of the crap they're doing.

RE: Settlement???
By lightfoot on 4/11/2012 2:48:48 PM , Rating: 2
A settlement almost always requires that the offending action ceases, even if they don't admit wrongdoing and pay a fine.

In this case either the agency model or the most-favored nation would almost certainly be eliminated.

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