Simon & Schuster, Hachette and HarperCollins settled their suits today, two people familiar with the matter said, but Apple and Macmillan have refused to engage in negotiations and deny they colluded to raise prices for ebooks.
The two firms will argue that pricing agreements between Apple and publishers enhanced competition in the ebook industry, which was dominated by Amazon.com.
The US Justice Department is probing how Apple changed the way publishers charged for ebooks on the iPad, Bloomberg reported. The Justice Department said it would announce an “unspecified” antitrust settlement today.
Penguin Group is also reported to be preparing to fight the US Justice Department in court if necessary.
Apple, Penguin and Macmillan want to protect the so-called agency model that lets publishers - not sellers - set ebook prices. The government is seeking a settlement that would let Amazon and other retailers return to a wholesale model, where retailers decide what to charge customers. A settlement could also void so-called most-favoured nation clauses in Apple’s contracts that require book sellers to provide the maker of the iPad with the lowest prices they offer competitors, the people said.
Consumers and competition could be hurt if several companies sign contracts that refer to prices charged to rivals even if those firms aren’t dominant, said Fiona Scott-Morton, a Justice Department economist, in an April 5 speech in Washington, signaling the antitrust division’s thinking on the issue of most-favored-nation clauses.
Upholding the agency model would give publishers more control over pricing and limit discounting, helping the industry avoid sales losses as more consumers buy books online.
US sales of ebooks rose 117 percent in 2011, generating $969.9 million, Publishers Weekly reported, citing estimates from the Association of American Publishers. By eliminating printing and shipping costs, digital versions generate higher profit margins than physical copies.
When Apple came out with the iPad in 2010, it let publishers set their own prices for ebooks as long as it got a 30 per cent cut and the publishers agreed to offer their lowest prices through Apple. This agency model overtook Amazon’s practice of buying books at a discount from publishers and then setting its own price for ereader devices.
The results of a settlement or lawsuit wouldn’t necessarily kill the agency model or prevent other publishers from continuing to set their own prices for e-books, one of the people said. Random House already has agreements with Apple and Amazon that lets the book publisher set prices for ebooks, the essence of the agency model. The company isn’t a part of the US inquiry.