Three book publishers have agreed to an anti-trust settlement that will see them collectively pay more than $69 million in order to resolve charges that they collaborated with Apple to raise the prices of digitally-distributed books. Hachette Book Group, HarperCollins Publishers and Simon & Schuster are among the original group that has settled: Apple, MacMillan and Penguin Group weren’t included in this agreement.
The settlement was reached with the attorneys general of 54 US states, districts and territories. Furthermore, these three publishers must allow online retailers to set prices for e-books as they see fit moving forward.
The Department of Justice notified Apple and five major book publishers in March about plans to file an antitrust lawsuit against them if they didn’t change business practices with regards to e-book pricing. The move was spurred by a European Commission investigation into the matter in December 2011. The DOJ followed through on their promise, filing a lawsuit in April 2012.
The issue relates to alleged meetings that Apple had with the book publishers before the first iPad was released. Apple wanted book publishers to adopt an “agency model” where they would be able to set their own prices for titles in Apple’s online book store. Digital book sales up until that point had worked on a “wholesale model” where publishers would sell books to stores and it was up to the store to price the books as they saw fit.
Publishers weren’t fond of the wholesale model because retailers like Amazon would often price best sellers for just $9.99, less than what they paid for them simply to gain a wider Kindle customer base. With an agreement with Apple, publishers were able to force other retailers into a similar deal or threaten to pull their catalogs. This resulted in consumers paying “tens of millions” of dollars more for e-books than they would otherwise have.
A large portion of the judgment will be given to customers affected by the price-fixing. Amazon, Apple, Barnes & Noble, Google and Sony will all be contacting customers in the near future regarding the settlement.