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Apple, Macmillan Prepped to Fight DoJ Lawsuit Over E-Books

Apple and book publisher Macmillan, two parties who refused to engage in settlement talks with the Department of Justice over the whole ebook price fixing scandal, are now preparing themselves to be sued by the government, claims insiders. Both Apple and Macmillan deny that they colluded to raise prices for digital books, and plan to argue in an antitrust case that the price increase actually enhanced competition in a sector once ruled by Amazon and its Kindle devices.

The Justice Department's antitrust arm warned Apple and five publishers -- Macmillan, Simon & Schuster, Hachette Book Group, HarperCollins and Penguin Group -- that it planned to sue them for allegedly fixing the prices of ebooks back in March. Currently the government agency is probing how Apple may have influenced the publishers to go with an Agency Model industry-wide with the launch of the original iPad.

But as reported last month, the Justice Department is leaving the door open settlements which will reportedly come to a close this week. Simon & Schuster, Hachette Book Group and HarperCollins planned to settle by Wednesday to avoid a costly legal battle, which they have already done so, while Penguin Group will likely fight the Justice Department in court if necessary. Like Apple and Macmillan, Penguin wants to protect the Agency Model which puts ebook pricing in the hands of publishers, not retailers.

But if the Department of Justice wins its case, ebook pricing will likely revert back to retailers like Amazon and Barnes & Noble who set their own prices. This is what started the whole ebook pricing investigation in the first place: a collective action to prevent Amazon from dominating the ebook market by selling virtual books for $9.99 USD and less. As it stands now, the Agency Model puts ebook prices higher than paperbacks, and there's no physical media or actual print publishing involved.

Click here to see the DoJ's filing (PDF).

A win by the Justice Department would also void most-favored nation clauses in Apple's contracts that require publishers to provide the iPad maker with the lowest prices they offer competitors. "Consumers and competition could be hurt if several companies sign contracts that refer to prices charged to rivals even if those firms aren’t dominant," said Fiona Scott-Morton, a Justice Department economist.

According to Bloomberg, upholding the agency model would give publishers more control over pricing and limit discounting, helping the industry avoid sales losses as more consumers buy books online. But consumers don't want to pay $12.99 USD for the next Dark Tower novel in ebook form when the actual hardback can be purchased for $16.20 USD. Sales of ebooks supposedly rose 117-percent in 2011, but the numbers may have been even higher had the ebook prices been more reasonable.

Random House also enforces the Agency Model, but for some reason isn't part of of the Department of Justice inquiry.

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  • jaber2
    Get ready to get some credit for future E-Book purchases soon.
    Reply
  • freggo
    "the price increase actually enhanced competition"

    True, a healthy profit margin will attract more players.
    But the keyword is 'healthy' !
    If you start selling e-books for more than the print version you are abusing your position.
    Times are bad enough for consumers. Squeezing the last drop of blood out of their wallet to finance fat Manager paychecks is exactly the kind of behavior that will get 'illegal' copying started.

    These morons should learn from the failed RIAA business model!

    Reply
  • andywork78
    Again???
    Reply
  • signothorn
    More companies will be sued like this leading up to November. I'm not saying they aren't guilty and shouldn't be accountable, just expect more of these type of lawsuits in the news leading up to the elections imho.
    Reply
  • john_4
    And I thought the San Francisco based Apple (Queen Nancy Pelosi's district) were in bed with the fascist left. Now Apple knows a little how Gibson Guitar feels. Impeach the Kenyan liar.
    Reply
  • hoof_hearted
    I wish they would go after wireless carriers. Compared to what Europeans are paying, USA consumers are getting ass-raped.
    Reply
  • LuckyDucky7
    This is what started the whole ebook pricing investigation in the first place: a collective action to prevent Amazon from dominating the ebook market by selling virtual books for $9.99 USD and less. As it stands now, the Agency Model puts ebook prices higher than paperbacks, and there's no physical media or actual print publishing involved.
    (emphasis added).

    Yeah... you're guilty. How about actually competing for a change? It costs less in legal fees.

    No wonder all the other publishers are settling out of court- they know it's likely they won't win because the facts are completely against them (plus it's simply the smart thing to do when your nose isn't completely clean).
    Reply
  • maestintaolius
    john_4And I thought the San Francisco based Apple (Queen Nancy Pelosi's district) were in bed with the fascist left. Now Apple knows a little how Gibson Guitar feels. Impeach the Kenyan liar.Not sure if Poe...
    Reply
  • slabbo
    oh man, i laughed so hard when they pretty much admitted to price fixing and saying that it actually enhanced competition. this should be a really quick open and closed guilty case here. These damned crooks need to the get the maximum sentence plus some, just for being so cocky about it being okay to price fix.
    Reply
  • del35
    "Both Apple and Macmillan deny that they colluded to raise prices for digital books"

    Apple at its best making nefarious backroom deals in order to steal more and more money from its dumbed down zombies. Die Apple die and take with you all your crap hardware; and please dont forget the retina display that Samsung manufactures for you!
    Reply