US sues Apple over e-book price fixing scheme

Apr 12, 2012 |

IANS

Washington

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Apple and five of the publishing industry's top firms have been accused of conspiring to raise prices and block Amazon.com from selling e-books at $9.99 in a US Justice Department suit.

The suit filed Wednesday stems from the 2010 release of the iPad, when Apple reached an agreement with the five publishers to release books on its then-new iBookstore.

Three publishers - Hachette, Simon and Schuster and HarperCollins - agreed to settle. Apple, Penguin Group and Macmillan did not agree to settle. Macmillan's chief executive said Wednesday that the firm would fight the charges in court.

US Attorney General Eric Holder said that as a result of the conspiracy, "consumers paid millions of dollars more for some of the most popular titles" and competition was eliminated.

Attorneys general for Connecticut and Texas led a handful of other states in separate litigation against the companies as well.

Before the release of the iPad, Amazon's Kindle was the preeminent e-book reader on the market. Amazon forced publishers to sell most books at $9.99 -- a price that came in below the cost of the books.

According to the Justice Department, booksellers were unnerved by the discounted e-book price structure Amazon launched in 2007.

The publishers went to Apple in late 2009 to find a way to force Amazon to raise its prices. The iPad proved to be the perfect tool to accomplish that.

The alleged conspiracy placed many books at so-called "agency pricing," putting them on the market for about $12.99 and giving Apple a 30 percent cut. About three days later, Amazon allowed publishers to set their own prices, resulting in higher prices on the Kindle as well.

Apple and Amazon both strike deals dubbed "most-favoured nations" clauses with publishers that forbid them from offering other retailers' deeper discounts.

As part of the settlement reached with the three publishers, the companies will be forced to terminate their most-favoured nations contracts with retailers and Apple.

They also will not be allowed to negotiate new most-favoured nations contracts for five years.

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