US Sues Apple, Book Publishers for Price Fixing

April 11, 2012 Updated: April 11, 2012

NEW YORK—The U.S. Department of Justice and several states have brought a lawsuit against consumer electronics giant Apple Inc. and several book publishers over allegations of price fixing of e-books.

Approximately 15 U.S. states joined the lawsuit, which allege Apple and book publishers—including the major publishers Simon & Schuster, Penguin, and HarperCollins—colluded to increase prices on e-books by between $2 and $5, an act which cost consumers millions of dollars over the last two years and restrained competition in the market.

Hachette, HarperCollins, and Simon & Schuster reached a settlement on Wednesday, hours after the lawsuit was filed. The civil antitrust lawsuit was filed in the U.S. District Court in the Southern District of New York.

“We believe that consumers paid millions of dollars more for some of the most popular titles,” said Attorney General Eric Holder in a statement. “We allege that executives at the highest levels of these companies—concerned that e-book sellers had reduced prices—worked together to eliminate competition among stores selling e-books.”

Connecticut Attorney General George Jepsen estimated that total cost to consumers paying more for these e-books amounts to more than $100 million.

The lawsuit alleged that the conspiracy came about after Amazon.com Inc. had success selling e-books at prices less than $10 per book. Apple and several publishers—in order for Apple to receive a 30 percent commission on all books sold—worked to maintain high prices for books, the lawsuit alleged.

“It is also hard to settle a lawsuit when you know you have done no wrong,” Macmillan CEO John Sargent wrote in a letter to authors and agents posted on the company’s website. Sargent said that his company did not collude and will go into litigation.

But the U.S. government disagrees. “We allege that these executives knew full well what they were doing. That is, taking steps to make sure the prices consumers paid for e-books were higher,” said Sharis Pozen, acting head of Justice Department’s antitrust team.

Pozen said that former Apple CEO Steve Jobs was involved in the discussions. “‘The customer pays a little more, but that’s what you want anyway,'” Pozen quoted Jobs as saying to the book publishers involved.

The lawsuit painted online retailing giant Amazon.com as a victim of the price fixing, alleging that Amazon couldn’t sell certain e-books at lower prices as dictated by the publishers. Since launching its popular Kindle e-book reader, Amazon has pushed to sell most books at a flat price of $9.99, a steep discount from similar hard copies.