Connecticut AG Investigating Apple, Amazon Over E-Book Pricing

Connecticut’s Attorney General Richard Blumenthal has begun an investigation into whether or not Apple and Amazon, the two biggest sellers of e-books in the US, are collaborating to keep prices up.

Mr. Blumenthal’s office issued a press release today saying that Amazon and Apple are leveraging their sizes against publishes. Both companies have a most favored price clause, which says that they alone will be allowed to sell e-books for the lowest price. Macmillan, HarperCollins, and Penguin all have these sorts of agreements. If HarperCollins were to allow e-books.example to sell a book for $7, Amazon and Apple would both immediately be allowed to sell the book in question for $7.

The antitrust argument is that because Apple and Amazon are so big, no one will use another e-book seller if they can get the same price from one of the larger companies. This discourages both discounting and competition.

The bottom line: if Mr. Blumenthal finds that Amazon and Apple are in fact in violation of antitrust laws, both companies could lose the MFN clause in their contracts. This would then allow the publishers to give better deals to other digital retailers. Any ruling is probably a few years down the line, but I would imagine Amazon and Apple are going to take a small hit to their share prices over the news.