Apple Refusing to Settle Ebook Price Fixing Case With Justice Department

Posted on April 5, 2012

The Wall Street Journal reports that settlement talks between the U.S. government, Apple and U.S. book publishers over price fixing claims on ebooks aren't going so well.

The Justice Department has warned Apple and the major publishers that if they don't change their ways they are all getting sued for price fixing. Both the U.S. and the European Union have told the parties that when they sat down with Steve Jobs to agree on higher prices for ebooks by forcing Amazon.com to use the new agency model instead of the old wholesale model of book sales, they were violating antitrust laws which prohibit price fixing.

The WSJ says that CBS Corp.'s Simon & Schuster Inc., HarperCollins Publishers Inc. and Lagardere SCA's Hachette Book Group have all seen the light and are ready to settle to avoid a major antitrust prosecution. But Apple, Penguin Group (USA) and Macmillan (which is owned by Verlagsgruppe Georg von Holtzbrinck GmbH) are dragging their heels and don't want to settle.

Apple reportedly wants the Justice Department to allow publishers to keep the agency model in which they can set the price of the book, and force Amazon.com not to discount the titles. The Justice Department isn't buying it, according to the WSJ's sources. Those sources say the Justice Department says the only way publishers got Amazon to accept the agency model was by using an illegal conspiracy between rivals.

Negotiations are ongoing, and none of the parties will comment on the record. But this is a textbook case of price fixing. The official Steve Jobs biography candidly lays out how the agreement between the publishers and Apple went down -- in Jobs' own words. Apple is mostly likely going to have to cave in or face a major, unpleasant prosecution for violation of antitrust laws.