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Neon Tommy - Annenberg digital news

DOJ Set To Sue Apple Over E-Book Pricing

Staff Reports |
April 10, 2012 | 9:06 p.m. PDT

Sources close to the Department of Justice have revealed that Apple could be slapped with a lawsuit as soon as Wednesday for alleged price fixing in their e-books store.

The department has been investigating Apple and several major book publishers recently over deals to set prices for books sold at Apple's iBooks store. In question is an agreement between Apple and the publishers over the minimum price they would be allowed to sell the books. The terms of the contract stipulated that publishers would not be allowed to sell e-books to other online retailers, such as Amazon or Barnes and Noble, at a lower cost.

Over the past few years, prices in e-books have risen steadily. Last year, a lawsuit by e-book customers alleged that prices rose by 50 percent once Apple reached a deal with publishers.

Prior to Apple's deal, the e-books industry used a wholesale method, where publishers would sell books at a specific price and retailers were free to charge consumers however much they wished. This model allowed for retailers to set bargain prices of new releases as a method of drawing in customers.

Retailers had complained that Apple's price fixing deal limited their freedom and gave Apple a "most favored nation" status that allowed them to always sell at the lowest price. Several of the publishers are rumored to be accepting a settlement.

Apple takes in $50 million yearly from e-book sales, though they only control 10 percent of the market. Amazon controls 65 percent, with Barnes and Noble taking up 20 percent.

Some estimates put the entire industry's yearly profits at $1.7 billion.



 

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