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Wednesday, April 11, 2012

Justice Dept. files suit against Apple, publishers over e-book pricing

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The Justice Department is alleging that Apple worked with publishers to raise e-book prices. Settlements are expected today, according to multiple reports.

The Apple store in Paris sports the company logo on a flag.

Apple gets hit with an antitrust lawsuit.

(Credit: Stephen Shankland/CNET)

The U.S. Department of Justice filed a lawsuit against Apple and several book publishers this morning, claiming that they worked together to artificially prop up prices for e-books.

The publishers sued were Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster. The suit (posted below) was filed in a district court in New York.

"Apple facilitated the publisher defendants' collective effort to end retail price competition by coordinating their transition to an agency model across all retailers," according to the complaint.

Apple and Macmillan haven't engaged in settlement talks with the Justice Department,Bloomberg reported. The companies have denied any wrongdoing and will argue that their agreement actually improved the competitive environment in the face of competition from Amazon and its own e-book business.

CBS's Simon & Schuster, Lagardre's Hachette Book Group, and News Corp.'s HarperCollins are looking to settle with the U.S. government as soon as today, Bloomberg reported, citing anonymous sources. (Disclosure: CBS also owns CNET.)

The probe apparently stems from changes made to how publishers charge for e-books when Apple released the first
iPad two years ago. Book publishers began using an "agency model" in which publishers set their own e-book prices, rather than the traditional wholesale model in which publishers set a retail price and retailers set their own sales price.Bloomberg said the Justice Department would announce an "unspecified" antitrust settlement today.

The pricing model materialized in 2010 after book publishers asked Amazon to increase the price of e-books on its Web site, but Amazon stood firm in its contention that anything above $9.99 was too high. Amazon eventually relented after many popular Macmillan titles disappeared from the e-tailer's site.

A separate lawsuit objecting to the pricing model was filed against Apple and the publishers last year. The plaintiffs alleged that they paid higher prices for their book purchases as a result of the agency model.

U.S. v. Apple, et al e-book complaint