The US Justice Department has reportedly told Apple and five publishers that it intends to sue them for allegedly colluding to raise the price of electronic books, according to a Wall Street Journal report.
The action is being taken over claims that the parties came together to establish an increased standard price for e-books that would be used for titles sold by Apple, Amazon and all other Web-based retailers. Former Apple CEO Steve Jobs is reported to have spearheaded the move towards an “agency” based system, which gave Apple a 30 percent share of sales while ensuring that prices remained consistent across the Web.
Further, rather incriminating details of the plan can be found in comments published in Jobs’ biography, written by Walter Isaacson:
We told the publishers, ‘We’ll go to the agency model, where you set the price, and we get our 30 percent, and yes, the customer pays a little more, but that’s what you want anyway.
The move saw Amazon forced to abandon its aggressive price slashing and cooperate in order to retain its suppliers, as Jobs further explains in the biography:
They went to Amazon and said, ‘You’re going to sign an agency contract or we’re not going to give you the books
Sources close to the matter told the WSJ that, in response to the threat, a number of publishers have held talks to settle the case and avoid a court battle, as the case is seen as having the potential to hugely impact the future of e-book pricing across the publishing industry.
However, the publishers have also denied their guilt and are reported to have explained that the switch to agency pricing was designed to introduce “enhanced competition in the industry by allowing more electronic booksellers to thrive”.
Amazon had been criticised by rivals for its former pricing policy, which sometimes saw it sell titles for less than it paid for them, in order to gain customer traction. However, elements of that policy could be retained if, as reported, a compromise of an agency approach with an option to allow some discounts wins support.
However, the end may not be in sight for some while yet. Though talks have reportedly been ongoing for some time, sources say that negotiations have taken “many turns” with the publishers considering a pragmatic settlement.