U.S. Dept. of Justice investigating Apple and U.S. publishers Simon & Schuster, Hachette, Penguin, Macmillan and HarperCollins for allegedly colluding to fix e-book prices; several of the parties trying to head off possible antitrust lawsuit

LOS ANGELES , March 8, 2012 () –

Apple Inc. and five of the largest U.S. book publishers have received word that they are being investigated by the U.S. Dept. of Justice (DOJ) for alleged colluding to fix prices on electronic books, according to people familiar with the matter, The Wall Street Journal reported on March 8.

Several of the parties involved have met to try to reach a settlement and avoid a lawsuit, said the sources. Such a settlement could have a wide-ranging impact on the pricing of e-books, although not every publisher has joined the talks.

The publishers include CBS Corp.'s Simon & Schuster Inc.; Lagardere SCA's Hachette Book Group; Pearson PLC's Penguin Group (USA); Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH; and News Corp.’s HarperCollins Publishers Inc.

Neither Apple nor any of the five publishers involved have agreed to comment on the matter, the Journal reported.

The DOJ’s case is based on the way that publishers charge for e-books under Apple’s so-called agency model, under which publishers set the price of the e-books and Apple gets a 30% cut; in addition, other booksellers are not allowed to sell the same book for less.

Apple and the five publishers worked in concert to increase e-book prices in violation of federal antitrust laws, according to what the DOJ believes, the people familiar with the matter said, reported the Journal.

Publishers deny that they colluded to raise prices and say that agency pricing enhanced competition by increasing the prospects that more competitors would survive in the marketplace.

In testimony to the DOJ, Barnes & Noble Inc. CEO William Lynch said that a single market player would gain even more market share if the agency pricing model were abandoned, people familiar with the deposition said, the Journal reported.

Amazon.com Inc. sold digital books for less than it paid for them prior to agency pricing. Publishers worried that this would drive away competition.

Discussions among the parties trying to reach an out-of-court settlement have been under way for some time and have “taken many turns,” said one publisher familiar with the matter. It’s uncertain if a settlement will be reached or how many of those involved might agree, the Journal reported.

The primary source of this article is The Wall Street Journal, New York, New York, on March 8, 2012.


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