Edible Apple

Breaking news this morning as Bloomberg is reporting that the US DOJ is suing Apple and a host of other publishers alleging that all the parties colluded together in an effort to raise this price of eBooks. The publishers taken to task include Hachette SA, HarperCollins, Macmillan, Penguin and Simon & Schuster.

Apple and Macmillan, which have refused to engage in settlement talks with the Justice Department, deny they colluded to raise prices for digital books, according to people familiar with the matter. They will argue that pricing agreements between Apple and publishers enhanced competition in the e-book industry, which was dominated by Amazon.com.

For its part, Apple has explained that they want to sell as many eBooks as possible and that it’s in their interest to have eBook pricing be as low as possible. And again, given Amazon’s absolute dominance in the realm of eBooks, it’s curious that it’s taking Apple to task for antitrust violations.

The actions under scrutiny here relate to Apple’s implementation of the agency model wherein it lets publishers – and not retailers like Amazon – set the price of eBooks. At the end of the day, this issue boils down to a basic question – do we put the power in the hands of publishers to set their own prices and let the market settle accordingly, or do we let vendors like Amazon and Apple arbitrarily set the price. The former is a boon for publishers and the latter is advantageous for consumers.

The concern is that if publishers set their own prices, they could collude to raise prices across the board.

When Apple came out with the iPad in 2010, it let publishers set their own prices for e-books as long as it got a 30 percent cut and the publishers agreed to offer their lowest prices through Apple. This agency model overtook Amazon’s practice of buying books at a discount from publishers and then setting its own price for e-reader devices.

We’ll keep you updated as more details come in.

via Bloomberg