Apple and a handful of publishers got hit with a price-fixing lawsuit on Wednesday, with the Department of Justice finally snipping the string on the sword of Damocles that's been dangling over the e-book industry for months. Bloomberg was first to the story, but The Wall Street Journal's coverage of the antitrust suit is much easier to understand, which is good for us non-industry types.
Per the WSJ's Chad Bray and Brent Kendall, the Department of Justice "alleges Apple and the publishers reached an agreement where retail price competition would cease, retail e-books prices would increase significantly and Apple would be guaranteed a 30 percent 'commission' on each e-book sold." At issue here is what's known as an agency model, in which publishers set the price for their e-books, as opposed to a wholesale model, in which vendors set the retail prices, Bloomberg's Bob Van Voris explains.
Hachette SA, HarperCollins, Macmillan, Penguin, and Simon & Shuster join Apple as defendants, but this can't come as news to them because, as The Atlantic Wire's Adam Clark Estes pointed out last month, the DOJ already warned them about potential price-fixing violations. If the suit works, and publishers either settle or lose, we could see e-book prices start to come down after publishers rebelled against Amazon's $9.99 price-point in 2010. That's the year they agreed to fix prices, ahead of the iPad release, DOJ alleges.
This article is from the archive of our partner The Wire.