DOJ Files Antitrust Suit Over E-Book Pricing

Last month the U.S. Department of Justice filed an antitrust suit against Apple and 5 major publishers – Hachette, Harper Collins, MacMillan, Penguin and Simon & Schuster – alleging collusion in e-book pricing and sales models.  U.S. Attorney General Eric Holder, acting Assistant Attorney General Sharis A. Pozen and Connecticut Attorney General George Jepsen made the announcement at DOJ headquarters in Washington, D.C.  It’s surprising to see that digital publishing – a truly 21st century technological phenomenon – has fallen under the glare of the nation’s top law enforcement official.  But, it’s equally serious – and perhaps even warranted – as the number of publishing outfits diminishes.  It appears the 5 publishers named in the suit most feared the Amazon giant.

According to the suit, filed in the Southern District of New York, the 5 publishers “feared that lower retail prices for e-books might lead eventually to lower wholesale prices for e-books, lower prices for print books, or other consequences the publishers hoped to avoid.”  It also mentions “deflating hardcover prices” and charges that the “Publisher Defendants were especially concerned that Amazon was well positioned to enter the digital publishing business and thereby supplant publishers as intermediaries between authors and consumers.”

When the 5 publishers couldn’t force Amazon to stop selling e-books at such sharply discounted prices, they conspired to increase those very same e-book prices and thereby limit competition in the sale of digital books.  To accomplish their goal, the publishers teamed up with Apple, which had the same desire to restrain retail price competition over e-books.”

The lawsuit further alleges that Apple wished to raise the profit margin for e-book retailers above what Amazon and its competitors had been making.  The suit also claims that prior to negotiating with Apple, executives with the 5 publishers engaged in a series of meetings, telephone calls and other communications where they “agreed to act collectively to force up Amazon’s retail prices and thereafter considered and implemented various means to accomplish that goal, including moving under the guise of a joint venture.”  One e-mail stated that “without a critical mass behind us Amazon won’t ‘negotiate,’ so we need to be more confident of how our fellow publishers will react…”  It also charges that publishers sought to destroy evidence and conceal their communications, showing they knew their activities were illicit.

This conspiracy would make the Enron scoundrels proud.  And, the 5 publishers almost sound like the “five families;” a.k.a. the mafia.  It’s distressing for writers, whose first love is the written word, to see the creative world run smack into the brutality of corporate politics.  There are mixed feelings.  On one side, no decent writer wants to see their publishing choices limited to just a handful of conglomerates.  On the other is the leeriness of government interference in the arts.  But, there’s a reason it’s called show business.  It’ll truly be interesting to see how far the DOJ will go with this case.

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