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Justice Dept. Investigates E-book Industry Over Price Fixing

By - Source: LA Times | B 26 comments

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."

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Top Comments
  • 14 Hide
    xical , December 8, 2011 10:09 PM
    anti-competitive practices = apple
Other Comments
  • 14 Hide
    xical , December 8, 2011 10:09 PM
    anti-competitive practices = apple
  • 2 Hide
    jimmy-bee , December 8, 2011 10:13 PM
    Eric Holder is a criminal and needs to go to jail, Fast & Furious.
  • Display all 26 comments.
  • 9 Hide
    soccerdocks , December 8, 2011 10:15 PM
    Just please don't let this industry set up its own version of the RIAA/MPAA.
  • 3 Hide
    A Bad Day , December 8, 2011 10:27 PM
    I pity those who bought an ebook and thought they would save money in the long run.
  • 7 Hide
    ImThat1Guy , December 8, 2011 10:33 PM
    Jeebus publishers, you shouldn't be making more off eBooks. You should make exactly the same. Take regular price, subtract printing/shipping/whatever, and there you go. Everyone wins, except maybe people working at printing places.
  • 2 Hide
    nurgletheunclean , December 8, 2011 10:35 PM
    Who cares. Let them charge as much as they want for the damn things, Just because all Ebooks would cost more doesn't mean people will buy them. Last time I checked there's a whole lot of free stuff to read on the internet already. "When I tell people I just saw a movie, the book snobs say ohhh but the book was much better, I say, you know what I liked about the movie...No reading, and I was done in 2 hours." --Jim Gaffigan
  • 2 Hide
    jellico , December 8, 2011 10:55 PM
    jimmy-beeEric Holder is a criminal and needs to go to jail, Fast & Furious.

    That's funny, I was just thinking the same thing. E-book price fixing... really? That's the priority for the "Justice" Department?
  • 9 Hide
    cumi2k4 , December 8, 2011 11:02 PM
    back then when there's no ebook, the publisher will tell us that the cost of books is high due to printing, stocking and other overhead. What would they say now?
    Caught with their pants down, eh?
  • 0 Hide
    may1 , December 8, 2011 11:44 PM
    The big question here is whether these company actually made a formal agreement to fix prices together.
    It seems more likely, that the agreement was a tacit one, and reasons of high ebook price being the result of value of intellectual property in these books, to which n publishers have any incentive to undercut its competitors, since they are a cost and effectively a monopoly.
  • 1 Hide
    mortsmi7 , December 8, 2011 11:50 PM
    I'll take the local library over an over-priced e-book any day.
  • 2 Hide
    Kryan , December 8, 2011 11:52 PM
    "buy an expensive kindle and save money in the long run with cheaper prices per book"

    a year later: "BOOM! OWNED!"
  • 9 Hide
    jjtober1 , December 8, 2011 11:57 PM
    Its so stupid when you can buy a paperback that has been read once and have it shipped across the country for cheaper than an e book. Then when you finish your e book what can you do with it? Can't borrow it to a friend or anything. Stupid publishers, almost makes pirates seem like the good guys.
  • 1 Hide
    mrmike_49 , December 9, 2011 12:15 AM
    I refuse to pay the high prices for ebooks - rather go to the library and check out the book.

    Until the ebook price falls to less than 75% of paperback price, I will never buy an ebook

    (except at Baen Books - ebooks $15 when hardback comes out, $6 when paperback comes out)
  • 0 Hide
    alyoshka , December 9, 2011 2:40 AM
    I haven't bought an eBook until now, but I must have read a 100 PC magazines in the PDF format. So I really don't know what the price is all about.
    For Novels and fiction , I think Hardbacks and paperbacks are fine.
    Comics??? Well, those too, the old one I have are all printed on paper, collector stuff, but the new freaky ones with the new style of graphics, cheap glossy paper, I prefer the PDF version easy to chuck away.
  • -1 Hide
    itchyisvegeta , December 9, 2011 5:30 AM
    If you don't like it, then don't buy it. Supply and Demand. The demand for ebooks has gone up because of the rise of tablets. If people boycott them, the price will go back down. Just like when Netflix tried to raise their prices late last summer.
  • -4 Hide
    Anonymous , December 9, 2011 7:10 AM
    Having worked in a bookstore for years, and having been on technology for two decades, it's likely the printing and shipping costs of a traditional book have been replaced with the higher costs of technology. Server space that need to be upgraded frequently, bandwidth costs, a technology staff with higher salary costs, publishers reworking ebooks to the latest technology standard and updates which could change frequently (print books can just get reprinted), etc. Have you ever checked out the cost for making a *good* app or for converting an ebook so it looks good on-screen for each device? It can be expensive to develop. If you're familiar with cost-benefits, it could take a lot more sales to recoup costs when a price is too low. If I don't like an ebook price, then I either don't buy it, borrow it from the library; or, buy the print version (new or used) which no one can take from me and I can still read if I lose power or my charger for a few days.
  • 0 Hide
    jsc , December 9, 2011 7:19 AM
    booklover Have you ever checked out the cost for making a *good* app ...

    Well then, price the app appropriately.
  • 1 Hide
    blackened144 , December 9, 2011 1:30 PM
    Sort of off topic but when I first got my ereader a few years ago I thought I would buy the last Harry Potter book since I had never read it.. After searching for 2 days and not finding a place to buy it, I found out that JK Rowling doesnt release her novels as ebooks because they promote piracy.. So in order to read it on my brand new ereader, I had to pirate it.. I would have been willing to pay real money to buy it but was unable.. Anyway, back on topic, that same Christmas my sister gave me book 3 in a 4 book series.. I had already read book 1, and I thought, great, I can buy book 2 on my ereader for cheap and get caught up before I read the book my sister gave me.. The ebook was $2 more than the paper back online.. I remember asking myself, how the hell is that even possible?
  • 0 Hide
    blackened144 , December 9, 2011 1:38 PM
    bookloverHaving worked in a bookstore for years, and having been on technology for two decades, it's likely the printing and shipping costs of a traditional book have been replaced with the higher costs of technology. Server space that need to be upgraded frequently, bandwidth costs, a technology staff with higher salary costs, publishers reworking ebooks to the latest technology standard and updates which could change frequently (print books can just get reprinted), etc. Have you ever checked out the cost for making a *good* app or for converting an ebook so it looks good on-screen for each device? It can be expensive to develop. If you're familiar with cost-benefits, it could take a lot more sales to recoup costs when a price is too low. If I don't like an ebook price, then I either don't buy it, borrow it from the library; or, buy the print version (new or used) which no one can take from me and I can still read if I lose power or my charger for a few days.

    I use the Stanza PC app to convert ebooks.. It will read about 20 different formats and will allow you to export any source file to just about any format you want too.. Stanza was also the best ereader app available for iOS.. Much better than Amazons Kindle app, but then Amazon took over Stanza when it bought Lexcycle and is not going to release a version compatible with iOS5... So I just use the PC app to convert..
  • 0 Hide
    freggo , December 9, 2011 2:49 PM
    It's Simple. Cost of physically making a mass produced CD less than $1. Retail then is $20 and up. Result... pirating.
    Cost of 'making' an e-book compared to a hard copy... next to nothing. ask me to pay $15 for an e-version and I start looking for 'other sources' for my e-book :-)
    Despite what the movies tell us, greed is NOT all good ! :-)
    Besides, I never read an e-book, don't intend too. Love the feel of an actual book in my hand, flipping the pages and sipping a tea, coffee or whatever. It's kinda like making love; no matter how life like they make these 3D displays the e-Nudes do not compare well to the real thing :-)

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