Justice Department Sues For E-Book Price-Fixing

The Department of Justice filed an antitrust suit on Wednesday against Apple and five major publishers for allegedly colluding to drive up the price of e-books. Three publishers — Hachette, Simon and Schuster, and Harper Collins — settled with the Justice Department. Macmillan, Penguin, and Apple remain as defendants.

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AUDIE CORNISH, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Audie Cornish.

ROBERT SIEGEL, HOST:

I'm Robert Siegel. And we begin with the move the publishing industry has been dreading. The Department of Justice today brought an anti-trust suit against Apple and two major publishing companies. The charge - that they conspired to fix prices in the e-book market. Three other publishers were also named in the suit, but they reached a settlement to avoid what promises to be a costly fight. NPR's Lynn Neary has our story.

LYNN NEARY, BYLINE: Asserting that consumers had paid millions more for e-books as a result of the actions of Apple and the publishers, Attorney General Eric Holder today said the Department of Justice is committed to ensuring that e-books will be as affordable as possible. In announcing the lawsuit, Holder painted a picture of high-handed dealings between Apple and five of the major publishing companies.

ERIC HOLDER: During regular, near quarterly, meetings, we allege that publishing company executives discussed confidential business and competitive matters, including Amazon's e-book retailing practices, as part of a conspiracy to raise, fix and stabilize retail prices.

NEARY: The suit stems from an agreement reached between Apple and the publishing houses around the time the iPad was introduced. The publishers were hoping to offset Amazon's dominance in the e-book market. The giant online retailer had set the price of an e-book at 9.99, which the publishers thought was too low. So, they agreed to switch to a new way of doing business - the agency model - which would allow the publishers, not the retailer, to set the price.

Acting Assistant Attorney General Sharis Pozen offered this example of the kind of discussions which occurred as Apple and the publishers set up this new pricing model for e-books.

SHARIS POZEN: Our complaint also quotes Apple's then CEO Steve Jobs as saying: The customer pays a little more, but that's what you want - and he's referring to the publishers - that's what you want anyway.

NEARY: Three of the five publishing houses, Harper Collins, Hachette, and Simon and Schuster, agreed to settle with the Department of Justice. Apple and two others, MacMillan and Penguin, did not. All of the publishing companies declined to be interviewed, but John Sargent, CEO of MacMillan, released a letter explaining his company's position. Although it's always better to settle, Sargent said, the terms demanded by Justice were too onerous and would have, quote, "allowed Amazon to recover the monopoly position it had been building."

James McQuivey, an analyst with Forrester Research, says Sargent may be hoping to win over the public to his position. His use of the word monopoly, says McQuivey, is strategic.

JAMES MCQUIVEY: That's a word that you inject with intent, I believe. You're trying to suggest that big bad Amazon might have harmed the book industry, ironically, the way many believe Apple harmed the music industry. And so I think he's trying to say this wasn't about money for us. This was about preserving the importance of the industry that we are providing. And I think that's the case he's going to try to make, even if he ends up settling down the road.

NEARY: But Mark Cooper, director of the Consumer Federation of America, says the Justice Department has done the right thing for the consumer. He dismisses the publisher's argument that Amazon is poised to become a monopoly.

MARK COOPER: They may be a threat to the publishers, but that's only because they're more efficient and they'll deliver books at a lower cost. They're not a threat to the consumer, and that's what's the important point.

NEARY: The Justice Department says it will vigorously pursue its claims against Apple and the two publishing companies that did not settle. Lynn Neary, NPR News, Washington.

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