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U.S. DoJ Files Lawsuit Against Apple, Publishers Regarding E-book Pricing

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4/11/2012 1:22 PM ET

The United states Department of Justice announced Wednesday that it has reached a settlement with three of the largest book publishers in the United States- Hachette Book Group (USA), HarperCollins Publishers L.L.C. and Simon & Schuster Inc.-and will continue to litigate against Apple Inc. (AAPL: Quote) and two other publishers-Holtzbrinck Publishers LLC, which does business as Macmillan, and Penguin Group (USA)-for conspiring to end e-book retailers' freedom to compete on price, take control of pricing from e-book retailers and substantially increase the prices that consumers pay for e-books.

The department said that the publishers prevented retail price competition resulting in consumers paying millions of dollars more for their e-books.

The civil antitrust lawsuit was filed in U.S. District Court for the Southern District of New York against Apple, Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster.

The department said that at the same time, it filed a proposed settlement that, if approved by the court, would resolve the department's antitrust concerns with Hachette, HarperCollins and Simon & Schuster, and would require the companies to grant retailers-such as Amazon and Barnes & Noble-the freedom to reduce the prices of their e-book titles.

According to the complaint, the five publishers and Apple were unhappy that competition among e-book sellers had reduced e-book prices and the retail profit margins of the book sellers to levels they thought were too low. Before the companies began their conspiracy, retailers regularly sold e-book versions of new releases and bestsellers for, as described by one of the publisher's CEO, the "wretched $9.99 price point." As a result of the conspiracy, consumers are now typically forced to pay $12.99, $14.99, or more for the most sought-after e-books, the department said.

The complaint stated that the companies accomplished their conspiracy by agreeing to stop the longstanding practice of selling e-books, as they long sold print books, on wholesale to bookstores, and leaving it to the bookstores to set the price at which they would sell the e-books to consumers.

The department noted that the publishers also agreed with Apple to pay Apple a 30 percent commission for each e-book purchased through Apple's iBookstore and promised, through a retail price-matching most favored nation (MFN) provision, that no other e-book retailer would sell an e-book title at a lower price than Apple.

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by RTT Staff Writer

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