DOJ sues Apple over price-fixing scheme - Apr. 11, 2012
silly apple and it's e-book service.The U.S. Department of Justice on Wednesday brought a lawsuit against Apple and several publishing companies over a scheme to fix e-book prices, a source with knowledge of the investigation told CNNMoney.
The suit likely stems from the 2010 release of the iPad, when Apple reached an agreement with five publishers to release books on its then-new iBookstore.
A similar investigation led by the European Commission is probing whether Apple colluded to raise the price of e-books with CBS's (CBS, Fortune 500) Simon & Schuster, News Corp.'s (NWS) HarperCollins; Hachette Book Group; Pearson (PSO)'s Penguin unit and Macmillan.
Before the release of the iPad, Amazon's (AMZN, Fortune 500) Kindle was the preeminent e-book reader on the market. Amazon forced publishers to sell most books at $9.99 -- a price that came in below the cost of the books.
Apple's (AAPL, Fortune 500) agreement placed many books at so-called "agency pricing," putting them on the market for about $12.99 and giving Apple a 30% cut. Soon after that, Amazon allowed publishers to set their own prices, resulting in higher prices on the Kindle as well.
The DOJ is set to announce its lawsuit at noon, the source said. Apple and the Department of Justice declined to comment.
A class action lawsuit filed in California District Court last summer on behalf of Kindle consumers first alleged a conspiracy. According to the lawyers that filed the suit, booksellers were "terrified" by the discounted e-book price structure Amazon launched in 2007, when it sold many titles for $9.99.
The spooked publishers went to Apple around the time of the iPad's release, the suit alleges, to find a way to force Amazon to raise its prices.
Amazon still has regular skirmishes with publishers over rates it considers too high. In February, the company yanked distributor IPG's digital books from its Kindle store after a dispute over terms of their contract.