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DOJ Sues Apple for Price Fixing

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"Let me be clear: When companies enter agreements that prevent price competition, that is illegal."

The government says avid best-seller readers who use electronic books have been getting ripped off. Tina Fey's "Bossy Pants," Tim Tebow's "Through My Eyes" and Keith Richards' "Life" -- maybe they should have cost less.

The Justice Department and 15 states sued Apple Inc. and major book publishers Wednesday, alleging a conspiracy that raised the price of electronic books. Attorney General Eric Holder told a Justice Department news conference that "we believe that consumers paid millions of dollars more for some of the most popular titles" as a result of the alleged conspiracy.

They said the scheme cost consumers more than $100 million in the past two years by adding $2 or $3, sometimes as much as $5, to the price of each e-book.

"This action drove up e-book prices virtually overnight," said Sharis Pozen, head of the DOJ's antitrust division, at a news conference. "Let me be clear: When companies enter agreements that prevent price competition, that is illegal."

Watch the CNN Money news brief:

If there was price fixing, even the e-book version of the hot-selling Walter Isaacson biography of Steve Jobs, the late genius behind Apple computers, may have cost too much. In fact, according to Pozen, Apple's Steve Jobs told publishers involved in the alleged conspiracy that "the customer pays a little more, but that's what you want anyway."

Mr. Holder said executives at the highest levels of the companies conspired to eliminate competition among e-book sellers. Pozen said the executives were desperate to get Amazon.com -- the marketer of Kindle e-book readers -- to raise the $9.99 price point it had set for the most popular e-book titles, because that was substantially below their hardcover prices.

“The Justice Department settled with three of the publishers -- HarperCollins, Simon & Schuster and Hachette -- requiring them to grant retailers like Amazon and Barnes & Noble the freedom to reduce prices,” CNN Money reports.

"The publishers will also be forced to tear up their current agreements with Apple and other e-book publishers and negotiate new, fair, and legal agreements," the report adds.

The lawsuit said the effort to get e-book prices increased by Amazon.com came as Apple was preparing to launch the iPad. The government said the conspirators agreed that instead of selling books to retailers and letting them decide what retail price to charge, the publishers would convert the retailers into "agents" who could sell their books but not alter the publisher-set retail price. The scheme called for Apple to be guaranteed a 30 percent commission on each e-book it sold, the lawsuit said.

"To effectuate their conspiracy, the publisher defendants teamed up with defendant Apple, which shared the same goal of restraining retail price competition in the sale of e-books," the lawsuit said.

Apple and the publishers declined to comment.

“Apple and Amazon both strike deals with publishers that forbid them from offering other retailers' deeper discounts,” CNN Money reports, “Those agreements, dubbed ‘most-favored nation’ clauses, aren't straight-out illegal under antitrust laws -- but they're also not always legal.”

"The settlement will begin to undo harm and restore price-competition," Pozen said. "It will result in lower e-book prices and provide a more open and fair marketplace."

The 15 states in the state complaint are Texas, Connecticut, Alaska, Arizona, Colorado, Illinois, Iowa, Maryland, Missouri, Ohio, Pennsylvania, South Dakota, Tennessee, Vermont and West Virginia. Puerto Rico also joined that lawsuit, which was filed in federal court in Austin, Texas.

The Associated Press contributed to this article.

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