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Apple and Five Other Publishers Faces Lawsuit Over eBook Price Fixing

The US Justice Department today filed a antitrust lawsuit in a New York district court against Apple and publishers Hachette SA, HarperCollins, Macmillan, Penguin, and Simon & Schuster over alleged eBook price-fixing.

The federal suit, filed in U.S. District Court in New York, alleged that the publishers began illegally working together in the summer of 2009 to raise prices in response to Amazon’s offering of e-books for $9.99 each.

In a statement, US Attorney General Eric Holder said: “During regular, near-quarterly meetings, we allege that publishing company executives discussed confidential business and competitive matters – including Amazon’s e-book retailing practices – as part of a conspiracy to raise, fix, and stabilize retail prices.”

The news follows yesterday’s Reuters report, “the Justice Department is investigating alleged price-fixing by Apple and five major publishers: CBS Corp’s Simon & Schuster Inc, HarperCollins Publishers Inc, Lagardere SCA’s Hachette Book Group, Pearson and Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH.

A lawsuit against Apple, one of the parties not in negotiations with the Justice Department for a potential settlement, could come as early as Wednesday but no final decision has been made, the people said.”

“All the parties named in the suit–except Macmillan, Penguin, and Apple– are willing to settle to avoid legal costs,” Bloomberg notes.

In a separate statement, Acting Assistant Attorney General Sharis A. Pozen claims that Apple’s late founder Steve Jobs was directly involved in the eBooks pricing scheme, saying, “Our complaint also quotes Apple’s then-CEO Steve Jobs as saying, “the customer pays a little more, but that’s what you [he’s referring to the publishers here] want anyway”.”

The Justice Department has said that “three of the publishers involved in the lawsuit, Hachette, HarperCollins and Simon and Schuster, have already agreed to settle their cases with the government to avoid legal costs — leaving out Macmillan, Penguin, and Apple.”

The settlement with the Justice Department would require the agreeing publishers to allow retailers such as Amazon and Barnes & Noble to reduce the prices of e-books they sell from the publishers, the Justice Department said.

In addition, Hachette and HarperCollins agreed to settle the states’ lawsuit and pay a total of about $51 million in restitution to e-book customers nationwide. The states are still negotiating restitution with Simon & Schuster.

Macmillian, in a response said, “…the terms the DOJ demanded were too onerous. After careful consideration, we came to the conclusion that the terms could have allowed Amazon to recover the monopoly position it had been building before our switch to the agency model. We also felt the settlement the DOJ wanted to impose would have a very negative and long term impact on those who sell books for a living, from the largest chain stores to the smallest independents.”

An Apple spokesman said the company had no comment on the suits.

Amazon cheered the lawsuits and the settlements saying, “This is a big win for Kindle owners, and we look forward to being allowed to lower prices on more Kindle books,” the company said.

Update: Apple finally commented, here is what Apple’s Tom Neumayr said:

“The DOJ’s accusation of collusion against Apple is simply not true. The launch of the iBookstore in 2010 fostered innovation and competition, breaking Amazon’s monopolistic grip on the publishing industry. Since then customers have benefited from eBooks that are more interactive and engaging. Just as we’ve allowed developers to set prices on the App Store, publishers set prices on the iBookstore.”

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