Apple hit with antitrust lawsuit over e-book pricing

The US Department of Justice has today (Wednesday) filed an antitrust lawsuit against Apple regarding the pricing of e-books in its App Store.

The lawsuit is focused around Apple’s pricing policy, known as the agency model, that Apple operates when it comes to selling you e-books. When it comes to buying physical books, publishers will set a wholesale price for any given title, and then it’s up to the retailer to price the book as they wish. This scheme was originally used for e-books too. However now, publishers set the price for a book, and then anyone selling the book, be it Apple, Amazon, or anyone else, will get a 30% cut. The scheme was advocated by Steve Jobs when Apple stepped into the e-book market with the release of the iPad back in 2010.

The lawsuit has been filed against Apple and major publishers Hachette SA, HarperCollins, Macmillan, Penguin and Simon & Schuster. The claim states that the 6 corporations colluded to raise the price for e-books to enhance competition and reap the rewards. The DOJ has been investigating whether Apple’s deals with the five publishers is price-fixing. In an interview with Walter Isaacson, the late Steve Jobs explained the agency method:

“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’.”

“They [the publishers] went to Amazon and said, ‘You’re going to sign an agency contract or we’re not going to give you the books’.”

This came at a time when Amazon was looking to corner the e-book market by slashing prices to lure customers away from more expensive competition. From what Steve Jobs said to Isaacson, the Agency model sounds like one of Apple’s more sinister business strategies. In my opinion, if Apple have colluded with publishers and intentionally raised the price of e-books at the expense of consumers, people have a right to feel a little hard done by. What do you think? Is the agency model a necessary business strategy, in which case we should all just pay more and get on with life? Leave a comment below, and be sure to follow me on Twitter for all the latest Apple news, reviews and rumors.

 

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