States and feds sue Apple and publishers over e-book prices

By Jamey Dunn

If you do your reading on a Kindle, iPad, NOOK or other electronic reading device, state and federal officials say you could be getting gouged when you buy best-selling books.

Illinois joined 14 other states and Puerto Rico to sue Apple and book publishers Penguin Group, Macmillan and Simon & Schuster over allegations of price fixing and violating anti-trust laws. “By colluding to fix the price of e-books, publishers and Apple essentially forced consumers to pay millions more for e-books than they otherwise would have paid,” Illinois Attorney General Lisa Madigan said in a written statement. “Enforcing the state’s antitrust laws will ensure that consumers receive the full benefit of competitive pricing and choice in the marketplace.” Madigan is seeking refunds for Illinois customers who were overcharged under the scheme.

The U.S. Department of Justice is also suing Apple and book publishers Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster. The lawsuit alleges that the publishers and Apple colluded to prevent a drop in the costs of electronic books as competition grew. The DOJ and Madigan say that before Apple entered the marketplace in 2010, most bestsellers were $9.99, but after the company entered into agreements with publishers to raise the prices, the price tags went up to $12.99 and $14.99, and Apple received a 30 percent commission on the sales. Publishers then demanded the same prices from other booksellers. “Based on the commitments to Apple, the publishers imposed agency terms, over some objections, on all other e-book retailers,” said a written statement from the Justice Department.

“Beginning in the summer of 2009, we allege that executives at the highest levels of the companies included in today’s lawsuit — concerned that e-book sellers had reduced prices — worked together to eliminate competition among stores selling e-books, ultimately increasing prices for consumers,” Attorney General Eric Holder said today at a Washington, D.C., news conference. “As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles.”

Some publishers have argued that their agreements with Apple prevent Amazon.com from holding a monopoly over the e-book marketplace. 

Hachette, HarperCollins and Simon & Schuster agreed to settle with the Department of Justice. Under the terms of the settlement, they must end their agreements with Apple and allow retailers to sell their e-books at discounted prices. Amazon said in a written statement that as a result of the settlement, it plans to drop the cost of some of the e-books it sells.