Apple may be celebrating its successful launch of the new iPad and a load of other new and updated products, but the U.S. Department of Justice, no less, is apparently keeping itself busy with a different Apple-related matter. As reported today in the Wall Street Journal and noted by Apple Insider, the Justice Department is threatening legal action against Apple for allegedly conspiring with five major publishers in the country so as to establish tight control of the prices of e-books.
The issue can be traced back to the release of the first iPad and the first version of iBooks in 2010, prior to which the late Apple CEO Steve Jobs came to a special agreement with five of the “Big Six” book publishers, namely, HarperCollins Publishers, Hachette Book Group, MacMillan, Penguin Group (USA), and Simon & Schuster. The agreement, which Random House did not accept at the time (but later did), would enable publishers to set the price of a book and let Apple claim a 30% share from the sale of the book. Commonly referred to as an agency model, it would also prohibit Apple’s rival retailers to sell the same book at a lower price, or else the involved publisher would simply restrict access to the book.
This agency model went against the pricing standard, known as the wholesale model, that was until then being implemented by Amazon, Apple’s most formidable competitor in e-book selling. Under the wholesale model, Amazon would buy books from publishers wholesale and sell them at its own prices. Often Amazon’s prices were heavily discounted, much to the publishers’ dismay.
The agency model championed by Apple, according to the Justice Department, has led to high prices across the publishing industry. This in turn has effectively obstructed healthy competition among retailers, and hence warrants an antitrust probe. While publishers have denied the allegation, what Jobs was quoted as saying by his authorized biographer, Walter Isaacson, seems to indicate the contrary: “We told the publishers, ‘We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway.’”
A class action suit has been filed last year against the same set of defendants for practically the same allegation. The European Union has also been reported to be working on an antitrust litigation. I do hope we paying consumers will eventually emerge on the winning side of all these suits. I for one look forward to the day when the e-book version of a paperback I could get from a brick-and-mortar bookstore for a mere $4.99 would no longer go for a ridiculous $14.99 on iBooks, Kindle, Nook, Kobo or anywhere else.