The U.S. Justice Department today filed its long-awaited lawsuit against Apple and major U.S. book publishers, alleging that they conspired illegally to raise e-book prices to counter Amazon’s deep discounting.
Three of the publishers have agreed to settle the suit, freeing Amazon to revive its e-book discounting, the Wall Street Journal reports. The settling publishers are Simon & Schuster, HarperCollins and Hachette Book Group. Also named as defendants are The Penguin Group and Macmillan.
Referring to the settlement, Amazon says in a statement, “This is a big win for Kindle owners, and we look forward to being allowed to lower prices on more Kindle books.”
At a news conference this morning, U.S. Attorney General Eric Holder said the settlement represents “progress in protecting American consumers from anticompetitive harm, ensuring fairness in the marketplace, and making certain that cutting-edge technologies are available at the lowest possible price.”
Apple isn’t commenting on the case. Here’s an excerpt from the complaint.
Apple had long believed it would be able to “trounce Amazon by opening up [its] own ebook store,” but the intense price competition that prevailed among e-book retailers in late 2009 had driven the retail price of popular e-books to $9.99 and had reduced retailer margins on e-books to levels that Apple found unattractive.
As a result of discussions with the Publisher Defendants, Apple learned that the Publisher Defendants shared a common objective with Apple to limit e-book retail price competition, and that the Publisher Defendants also desired to have popular e-book retail prices stabilize at levels significantly higher than $9.99.
Together, Apple and the Publisher Defendants reached an agreement whereby retail price competition would cease (which all the conspirators desired), retail e-book prices would increase significantly (which the Publisher Defendants desired), and Apple would be guaranteed a 30 percent commission on each e-book it sold (which Apple desired). …
The plan — what Apple proudly describes as an aikido move — worked. Over three days in January 2010, each Publisher Defendant entered into a functionally identical agency contract with Apple that would go into effect simultaneously in April 2010 and “change[e] the industry permanently.”
These “Apple Agency Agreements” conferred on the Publisher Defendants the power to set Apple’s retail prices for e-books, while granting Apple the assurance that the Publisher Defendants would raise retail e-book prices at all other e-book outlets, too.
Prices on bestsellers and newly released e-books rose as to as much as $16.99 as a result, according to the suit.
Seattle lawyer Steve Berman, the lead counsel in a separate class-action complaint over the issue, said in a statement, “We’ve long held that Apple and this group of book publishers formed a cabal with the sole intent of extinguishing any competitive influences in the e-book marketplace. … While Attorney General Holder’s actions, if successful, will put an end to the anticompetitive actions, our class-action is designed to pry the ill-gotten profits from Apple and the publishers and return them to consumers.”