E-book Market Shake-up as Justice Pursues Anti-Trust

The New York Times reports that the Justice Department has filed suit against Apple and six publishers of e-books on anti-trust grounds that they colluded to set pricing. Attorney General Eric Holder alleges that the group met at expensive restaurants and "double deleted" e-mails in an attempt to hide their efforts to fight back against Amazon.com's low pricing of e-books. Led by former Apple boss Steve Jobs, they agreed to set their e-book prices for the iPad between about $12.99 and $14.99 compared with the typical $9.99 Amazon e-book Kindle price. Using the popularity of the iPad, the group hoped to fight back against the low prices driven by Kindle's popularity and Amazon's pricing.

The complaint alleges that the collusion caused

“consumers to pay tens of millions of dollars more for e-books than they otherwise would have paid.”

Three publishers that were investigated, the Hachette Book Group, Simon & Schuster and HarperCollins, have already agreed to a settlement that will most likely overturn their pricing model. Macmillan and Penguin Group USA, which were also named in the suit, have not settled. ... The publishers who have settled are required to end their e-book contracts with Apple and any other retailer with a “most favored nation clause,” which says that no other retailer can sell e-books for a lower price. For two years, the publishers are also prohibited from restricting any retailer’s ability to discount e-books.

Amazon appears poised to lower the prices for its e-books even further, which should be further pressure on the remaining competitors in the marketplace. There is a companion article in the Times about this, and concerns by some business analysts that Justice may be inadvertently setting up Amazon as a true monopoly in the e-book market.