Update: Apple, publishers face potential lawsuits from Justice Department

Update: Apple, publishers face potential lawsuits from Justice Department

According to the Wall Street Journal, Apple and five U.S. publishers are under fire from the Justice Department over alleged collusion over the prices of eBooks.

Apple, Hachette Book Group, HarperCollins Publishers, Macmillan, Simon & Schuster, and Penguin have all been notified of impending lawsuits, says an anonymous source.

All of the publishers have reportedly been worried by Amazon’s practice of selling some of their more popular ebooks at a loss in order to boost Kindle sales. Steve Jobs had worked with these publishers in proposing an “agency model,” in which Apple would take a 30 percent cut out of the sale of the books. Prices would be set by the publisher, but Apple also stipulated that the publishers couldn’t allow other retailers to sell the same book at a lower price. This is apparently where the DOJ felt that Apple had crossed the line.

The publishers have denied the collusion accusations.

Update: Apple has spoken out against the accusations against the alleged price fixing, claiming it has fallen victim to class action plaintiffs stringing together “antitrust buzzwords”. Apple defends themselves in their court filing:

[quote]… if Amazon was a “threat” that needed to be squelched by means of an illegal conspiracy, why would Apple offer Amazon’s Kindle app on the iPad? Why would Apple conclude that conspiring to force Amazon to no longer lose money on eBooks would cripple Amazon’s competitive fortunes? And why would Apple perceive the need for an illegal solution to the “Kindle threat” when it had an obvious and lawful one which it implemented – namely, introducing a multipurpose device (the iPad) whose marketing and sales success was not centered on eBook sales?[/quote]

The argument seems sound, but nice wording and marketing speak aren’t going to get rid of the Justice Department overnight. Expect more from this story during the coming weeks.

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