According to Reuters, US authorities have called Apple out for collusion with electronic book publishers, saying that the Cupertino-based company conspired with publishers to raise eBook prices when negotiating iBooks by playing them all against each other and against rival eBook retailer, Amazon.
The US Justice Department accused Apple of price fixing in April 2012 in relation to Apple’s negotiations with five publishers when it was launching the iPad in early 2010. The Justice Department has settled out of court with each of the publishers, which included HarperCollins, Simon & Schuster, Hachette Book Group, Macmillan, and Pearson’s Penguin Group.
Apple’s filing, released today but dated April 26, says that the major publishers were battling Amazon over the Seattle-based retailer’s practice of selling eBooks at a much lower price than the publishers wanted. Apple claims that the publishers had already decided to stop Amazon by eliminating wholesale discounts on eBooks and to sell hardcover books in physical book stores first (a practice called windowing).
According to the filing, when Apple approached publishers to set up what would eventually become iBooks, the publishers weren’t pleased with terms that included a 30 percent commission, a guarantee of not underselling Apple, and that publishers stop windowing. Each publisher, says Apple, had a different counterproposal.
“Early — and constant — points of negotiation and contention were over Apple’s price caps and 30 percent commission. After Apple sent draft agency agreements to each publisher CEO on January 11, each immediately opposed Apple’s price tiers and caps,” Apple said in an proposed filing with the court, a document that runs to 81 pages.
While the US Justice department charges that Apple and the named publishers drove eBook pricing up by an average of two to three dollars per book in early 2010, Apple claims that the launch of its original iPad helped drive an unexpected demand for eBooks, and that the average retail price for eBooks dropped about $.60 per book.