Publishers in dock over eBook price fixing
The five largest publishers, including Penguin, face legal action from the US Justice Department for colluding to raise the prices of electronic books, a source has told Reuters.
Several parties are said to have held talks to settle the potential antitrust case after an investigation into deals signed with Apple by Penguin, Simon & Schuster, Hachette Book Group, Macmillan and HarperCollins.
Traditionally, publishers sold books to retailers for roughly half of the recommended cover price. Under that "wholesale model," booksellers were then free to offer those books to customers for less than the cover price if they wished. Most physical books are sold using this model. Publishers feared that if applied to eBooks, the strategy would lead consumers to expect inexpensive eBooks and limit their ability to sell pricier titles.
The legal action centres on the so-called "agency model", adapted at around the time that Apple launched the iPad. It allows publishers to set the price of eBooks. In turn, Apple take a 30% cut. Apple also stipulated that publishers couldn't let rival retailers sell the same book at a lower price.
The Justice Department believes that Apple and the publishers acted together to raise prices across the industry. The publishers have denied acting jointly to raise prices. They have told investigators that the shift to agency pricing enhanced competition in the industry by allowing more electronic booksellers to thrive.
In December, the European commission said it was looking at the same five publishers in a potential price-fixing case.
Spokespeople for the five publishers and the Justice Department declined to comment.