The European Commission is undertaking a formal investigation to determine whether five international publishers and Apple worked together to keep e-book prices high, in part to battle Amazon.
According to a story from Ars Technica, five publishers have been implicated in the investigation: Penguin, Harper Collins, Macmillan, Simon & Schuster and Hachette Livre. The investigation is to determine whether the five publishers, possibly with Apple’s help, worked together to maintain high e-book prices in Apple’s iBooks store. Anti-competitive practices such as the ones the investigation is searching for are illegal under antitrust laws in the European Union, as well as in the United States.
Ars Technica’s story says that prior to also selling e-books on iTunes, publishers primarily had to go through other retailers like Amazon, and sold their e-books at “wholesale” prices. These prices allowed retailers to sell e-books for whatever they wanted, just like regular inventory, and Amazon and others could sell those e-books for far less than what they paid for them.
The lawsuit claims that Apple and all the organizations were “terrified” of Amazon pushing down the prices of e-books, particularly bestsellers, by selling them for as low as $5 or less. Publishers didn’t want to see the prices of e-books continue to go down, and Apple was preparing to launch the iPad, which it hoped would compete with e-reader devices offered by Amazon and others. Instead of buying e-books wholesale, Apple allows publishers to set the prices in its iBooks store and just takes a 30 percent cut.
The lawsuit alleges that with a common goal, the publishers and Apple used Apple’s agency agreements with the publishers to keep the prices of books in the iBooks store high, which allowed publishers to pressure Amazon into raising the prices of e-books as well. The lawsuit says that benefited everyone: publishers got the prices they wanted, and Apple was able to dismantle Amazon as a competitor before launching the iPad, which itself became a big force in the e-reader market.
The “agency model” for e-book pricing – the one where publishers set the prices of the e-books and the retailers take 30 percent – has become pretty much the industry standard for books, Ars Technica reports. We’ll have to wait to see how these legal actions against publishers and Apple wind up shaking out, and how they might affect books sold on Apple’s popular mobile devices.