US sues Apple and Major Publishers over e-book price fixing

US sues Apple and Major Publishers over e-book price fixingThe US justice department has filed an anti-trust lawsuit against Apple and five major publishers over alleged involvement in price fixing. The biggies mentioned in the lawsuit include Apple and publishers Simon & Schuster, HarperCollins, MacMillan, Hachette and Pearson. The lawsuit filed in the US District Court of Manhattan accuses the defendants of fixing prices of e-books before the launch of Apple’s iPad in 2010. It is important to note that the popularity of e-book’s was on the rise since 2007, the year Amazon came out with Kindle.

“Beginning in the summer of 2009, we allege that executives at the highest levels of the companies included in today’s lawsuit – concerned that e-book sellers had reduced prices – worked together to eliminate competition among stores selling e-books, ultimately increasing prices for consumers,” said Attorney General Eric Holder, speaking for the government. “As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles.”

It is believed that top level executives from these companies held meetings over lunch or dinner at various upscale Manhattan restaurants to raise, fix and stabilize retail prices.

Mr. Holder also revealed that Hachette, HarperCollins and Simon & Schuster had agreed to a proposed settlement, but the settlement would have to be approved by the U.S. District Court judge in Manhattan. On the other end of the spectrum, Apple, MacMillan and Pearson’s Penguin Group will legally fight the battle, revealed Antitrust Division Acting Assistant Attorney General Sharis Pozen.

Apple prior to the launch of its iPad had believed that it could top Amazon’s monopoly in the e-book market. However, it was weary of the intense price competition among e-book retailers. Amazon at the time were offering popular books at as low as $9.99. This is when Apple decided to meet with the publishers and put an end to the price competition, they decided to hike prices of e-books across the board and Apple would retain a 30% share for each book sold.

The move meant that the lowest selling price of a book at $9.99 had become $12.99 with the subsequent pricing at $14.99 and $16.99. Apple termed the pricing agreement an “Aikido move,” a reference to the Japanese martial art.

Apple continues to be tight lipped about the developments so far.

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