eBook sellers split over settlement

April 6, 2012

eBook sellers split over settlementIf the Department of Justice (DoJ) is to be believed, Apple and five book publishing giants united to force up the price of electronic books. Even if that is the case, the companies now appear utterly divided about how to respond to potential legal action.

The case centers on the way publishers or retailers set prices. Until the launch of the iPad, e-books were sold in the same way as printed titles: the publisher set a wholesale price and then the retailer decided how much to charge the public, which could even involve taking a loss to attract customers to a site or promote a particular device such as the Kindle.

However, five major publishing houses began demanding retailers agree to an “agency model” by which the publisher controlled the price charged to the public, with the retailer taking a fixed percentage. If this sound suspiciously like the model used for music and apps on iTunes, and if it seems suspicious this happened just as the iPad launched, well, officials share your suspicions.

They accuse Apple of colluding with the publishing companies and having them threaten to stop supplying Amazon altogether if they didn’t agree to the agency model. According to the DoJ that unfairly and uncompetitively raised prices for consumers. Apple and the publishers counter that there was nothing untoward about their agreement and that in any case Amazon was being uncompetitive by selling ebooks at a loss.

Now the Wall Street Journal reports that the firms are now longer sticking together. It believes that three of the publishers (Hachette, HarperCollins and Simon & Schuster) are prepared to agree a settlement proposed by the Justice Department. The precise details of that settlement haven’t been made public, thought it appears the companies would not only have to make individual deals with each publisher, but they wouldn’t be allowed to use the agency model at all for a fixed period.

The problem appears to be that the remaining publishers (Penguin and Macmillan) and Apple itself appear unwilling to agree to such a deal. That’s looking highly likely to provoke the DoJ to begin formal antitrust court proceedings.

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