Thursday, April 12, 2012

U.S. Sues Apple and Publishers for Alleged Price Fixing

I suppose we should have seen this one coming a mile away.  Yesterday, Attorney General Eric Holder announced that the Feds are suing Apple and some of the largest publishers in the world for conspiring to fix e-book prices.  You might remember when all this started.

Steve Jobs supposedly made a deal with five of the largest publishers in the United States just before the introduction of the original iPad that would allow Apple to charge more than what had become the standard e-book bestseller price of $9.99 (A Steve Jobs biography even contains a quote of his in which he bragged about the deal.) 

Jobs believed that he needed more of a margin if he was going to make a decent profit with his iBooks presence, and the publishers were very worried that the Amazon-imposed “discount” price would become fixed in the mind of consumers as a threshold beyond which they were not willing to go to buy an e-book.  So, I suppose, the agreement seemed to all involved as a match made in heaven.

The publishers knew they had to stick together if they were to get this all past the powerful Amazon bunch, however, and they exchanged emails and held secret meetings to make sure that they would remain unified.  Amazon balked for a while, but finally admitted defeat and raised its own prices.

As of today, three publishers (Hachette Book Group, Simon & Schuster, and HarperCollins) have already agreed to settle the charges by terminating their Apple agreement – thus freeing up Amazon to charge as little as it wants to charge on e-book sales.  Macmillan and Penguin have not settled. 

The smart money is saying that Amazon will soon be selling e-book bestsellers again for $9.99.  This is probably a good thing, at least in the short term, for consumers.  But what does it mean for Barnes & Noble, a company already struggling to stay in business and turn any kind of profit?  Is this just another nail in B&N’s coffin, or is it going to turn out to be the final one that nails the lid down tight once and for all?  What does it mean to other e-book sellers.  What does it mean to Apple, for that matter?

Would you, as a book consumer, be willing to pay the higher prices if that kept Amazon from developing a bookselling monopoly?  Is choice and availability as important to you, as a book-loving consumer, as price is?  If so, you might not be too happy in a year or so if Amazon’s victory holds up.  Tell me about it.


  1. You create very sharp context in the question of price against choice and availability. Right now, availability is amazing on Amazon, but the more power it gets, the more potential for that to shrink. Stories about Amazon's business practices have been fascinating in recent years.

  2. John, I fear the power of any monopoly because without competition there is no incentive to offer choice to the customer base. Prices inevitably go up as choice goes down and the government seems to be accelerating the whole process in the case of Apple and the publishers vs, Amazon. I don't want to live in a world where e-books are the only form in which I an acquire books...or cheap POD copies of books are my only other choice. I love books for the physical objects they are and love to be surrounded by shelves of quality items. The world will be a poorer place if Amazon becomes the only major bookseller in the world.