Much of the technology world was stunned to learn that an antitrust lawsuit against technology giant, Apple Inc, and several book publishers, was filed by the US. Government Wednesday morning. The lawsuit charges that Apple and the named publishers conspired to raise the retail prices of electronic-books in order to shun the competition, namely Amazon.com, who many say has monopolized the e-book industry.
Amazon has been largely successful in selling the electronic version of hit titles for $9.99, a far cry from the usual list price of $20 and up. In response, Apple struck a deal with publishers by which, instead of the retailer (such as Apple) setting the price for e-Books, the publisher sets the price, and the retailer takes a commission. Publishers with whom Apple struck this deal include The Penguin Publishing Co. Ltd., DBA Penguin Group and, at the the center of the controversy, Holtzbrinck Publishers DBA Macmillan. Macmillan CEO, John Sargent, claimed no wrongdoing and, in a letter sent to authors and agents, vehemently denied conspiring against Amazon, despite the fact that there were initial price disputes between Macmillan and Amazon, leading to Amazon temporarily pulling all Macmillan titles from their virtual shelves.
The lawsuit charges that the publisher defendants conspired with Apple because each party shared the intent to restrain retail price competition in the sales of e-books and Apple was to be guaranteed a 30 percent commission on each e-book sold. The terms initially offered to publishers by the Department of Justice to avoid legal action were not agreed to by several of the large publishers, including Macmillan, because they felt that the terms would still allow Amazon to continue its monopoly, with major long term implications for career booksellers.
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Amazon has dominated the competition by only offering e-books from publishers willing to heavily discount their titles, going so far as cutting loose publishers, such as the Independent Publishers Group, who refused to meet their terms. With the steep discounts Amazon has been able to offer their e-book customers, some speculate that Amazon is actually taking a loss on the sales. Amazon’s $9.99 book pricing has been attractive enough to make them the leader in e-book sales, and they even carried the pricing over to Audible.com, their monthly audiobook club where currency becomes “credits”, and the pricing structure is such that users can receive bestselling books for download to their MP3 players for as low as $10/book.
Publishers saw hope in the launch of the Apple iPad a few years ago, with the thought that Amazon had finally met its competition with consumers preferring to sink funds into the tablet over Amazon’s Kindle e-reader. The assumption was that iPad users would buy books from Apple’s iBookstore instead of Amazon, but Amazon rolled out their free Kindle iPad app, allowing consumers to have their virtual e-cake and eat it, too.
Court papers reflect that a settlement was reached with three publishers who agreed to the terms of not restricting or limiting the retailer of their e-books from altering or reducing the retail price of e-books. Further, the retailer could offer discounts to promote the book, meaning that if the hunch that Amazon is taking a loss on some titles to draw customers is correct, they are free to do so for at least two more years.
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