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An e-Book Conspiracy?

April 24, 2012 | Out of Print | Comments (0)


Last summer I blogged about a class-action law suit that had been filed against Apple and the "Big 5" publishers (Hachette, HarperCollins, Penguin, Macmillan, and Simon & Schuster) alleging price fixing for e-book titles. Now the U.S. Department of Justice has followed with a civil antitrust lawsuit against the same group, which alleges that "CEOs of the publishing companies met regularly in private dining rooms of upscale Manhattan restaurants to discuss how to respond to steep discounting of their e-books by Inc.,a practice they disliked. The executives also called and emailed each other to craft a solution to what one of them called "the wretched $9.99 price point"". (from the WSJ).

The lawsuit revolves around the incredible growth in e-book sales over the last three years, and the role that Amazon and Apple play in the sale and distribution of e-books. Amazon had set $9.99 as a standard price for most e-books, but the Big 5 felt this was too low a price and had the potential to go even lower and reduce profits. With the launch of the iPad and iBook Store by Apple in the spring of 2010, the publishers allegedly colluded with Apple to set the price at $14.99, a practice also known as price-fixing. The publishers then went back to Amazon and negotiated the newer higher price as standard, by using the threat that Apple would get exclusive access to popular new titles.

The Justice Department launched an investigation last year and unearthed e-mail and phone evidence of price-fixing plans going back to 2008. This has led to a batch of new legal actions against the publishers, including a lawsuit by 16 U.S. states alleging over $100 million in overcharges to consumers (Shelf Awareness) and an investigation by the European Commission over the same issues (The Bookseller). Even in Canada at least three class action suits are pending. Three of the publishers, HarperCollins, Simon & Schuster, and Hachette, have reached settlements before the DOJ lawsuit could proceed, but Penguin, Macmillan, and Apple intend to fight the case.

For consumers and libraries, these cases raise a number of challenging questions. While the idea that publishers would conspire to charge more for their products than retailers want to sell them for is distasteful, on the other hand it is troubling how large and powerful Amazon has become. If they are the only game in town, what prevents them from lowering prices to the point that publishers can no longer stay in business? The emergence of a competitor, i.e. Apple, should be a good thing for consumers and publishers; except when the new competition is not playing by the rules.



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