Posted On: April 11, 2012 by Ronald V. Miller, Jr.

E-Book Lawsuit Against Apple

It is anticipated that the U.S. Department of Justice will file suit today against Apple, as well as several publishing companies. The reason? A scheme to fix e-book prices.

In 2010, when iPad was released, and iBookstore was new, Apple reached an agreement with five publishers to release books on iBookstore. Before the release of the iPad, Amazon's Kindle was the preeminent e-book reader. Amazon forced publishers to sell most books at $9.99, a price that came in below the cost of the books. Apple's agreement placed many books on the market for approximately $12.99, and gave Apple a 30% cut, resulting in Amazon raising its prices.

The European Commission, in an investigation similar to the DOJ, is probing whether Apple conspired to raise the price of e-books with CBS's Simon & Schuster, News Corp.'s HarperCollins; Hachette Book Group; Pearson's Penguin unit and Macmillan.

Are these allegations fair? The lawsuit alleges that:

    [S]tarting no later than September of 2008 and continuing for at least one year, the Publisher Defendants' CEOs (at times joined by one non-defendant publisher's CEO) met privately as a group approximately once per quarter. These meetings took place in private dining rooms of upscale Manhattan restaurants and were used to discuss confidential business and competitive matters, including Amazon's e-book retailing practices. No legal counsel was present at any of these meetings.

That certainly does sound like the beginning of every story that ends in antitrust violations. But it worth noting these companies are not exactly shaking in their boots: all 5 defendants have seen their stock prices rise today.