Justice Dept. Investigates E-book Industry Over Price Fixing
The U.S. Justice Department is investigating Apple and five publishers over possible price fixing of ebooks.
Ever wonder why ebooks have gotten so expensive? For a time it seemed cheaper to purchase a virtual copy of a book rather than buy the paperback edition or the more expensive hardback edition. For those who thrive on collecting novels and shoving them into a library, the $30 price for a hardback may be worth every penny. The cheaper paperback version could be deemed collectible, but typically these are purchased, read, and then traded in at a used book store for something else. Paperbacks aren't expensive, but they're not cheap either... at least, not anymore.
Yet for those wanting to read on the go -- those who'd rather flip through virtual pages on their smartphone or tablet -- shelling out $15 just seems ridiculous. After all, there's no paper or printing involved, so what gives? Why have ebooks gotten even more expensive than a paperback? That's a question European regulators and now the U.S. Justice Department are trying to determine.
On Wednesday European Union antitrust regulators announced an investigation into Apple and several international book publishers including French publisher Hachette Livre, News Corp.-owned Harper Collins, CBS' Simon & Schuster, Britain-based Pearson Group's Penguin and the German-owned Macmillan. They are suspected of price fixing after switching to a new pricing system called the "agency model" which essentially pulled ebook pricing away from "retailers" like Amazon and Barnes & Noble.
According to the LA Times, the publishers didn't want Amazon to control the ebook market by selling virtual books at a $9.99 or less price point. Publishers viewed their ebooks to be worth a lot more, and decided as a collective -- along with Apple -- to agree on a model once the iPad tablet hit the market. This agreement would leave publishers in control of pricing while providing retailers like Amazon and Apple a fixed commission on each sale.
Once the agreement was set in place, ebook prices began to rise. Suspecting foul play, EU officials raided a handful of publishers back in March, seizing computers, contracts and executive smartphones. Then on Tuesday they announced that the Commission "will in particular investigate whether these publishing groups and Apple have engaged in illegal agreements or practices that would have the object or the effect of restricting competition."
Now the U.S. Justice Department's antitrust arm has gotten involved based on claims of unfair pricing practices by the said publishers. Details are scarce at this point, but Sharis Pozen, the acting assistant attorney general in the Justice Department's antitrust division, said the agency was "investigating the electronic book industry" over the possibility of "anti-competitive practices involving e-book sales."
Additionally, Attorneys general in Connecticut and Texas are now reportedly investigating electronic booksellers and how they price their virtual goods. They are also looking to see if Apple and Amazon have set up pricing practices that are "ultimately harmful to consumers."