The U.S. Justice Department told Apple Inc. (AAPL) and five publishers that it’s preparing to sue them for allegedly fixing the prices of electronic books, according to a person familiar with the matter.
Some of the companies are in talks with the Justice Department to reach a settlement to avoid a court battle, according to the person, who wasn’t authorized to speak about the discussions publicly and declined to be identified.
The publishers involved in the case are Lagardere SCA (MMB)’s Hachette Book Group, News Corp. (NWSA)’s HarperCollins Publishers, Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH, CBS Corp. (CBS)’s Simon & Schuster and Pearson Plc (PSON)’s Penguin Group (USA), the person said.
The Justice Department is looking into how Cupertino, California-based Apple changed the way publishers charged for e- books in early 2010 when it was getting ready to introduce its first iPad, the person said. European antitrust regulators also have said they’re probing whether Apple’s pricing deals with publishers restrict competition. Sharis Pozen, the acting chief of the antitrust division of the Justice Department, told Congress in December the division was probing the possibility of anticompetitive practices in the e-book industry.
30 Percent Cut
Gina Talamona, a Justice Department spokeswoman, Kristin Huguet, an Apple spokeswoman, Adam Rothberg, a spokesman for Simon & Schuster, Sophie Cottrell, a spokeswoman for Lagarde’s Hachette Book Group, Erica Glass, a spokeswomen for Pearson’s Penguin Group USA and Erin Crum, a spokeswoman for HarperCollins, all declined to comment.
The U.S. threats to sue publishers over the pricing practices and the settlement talks were reported earlier in the Wall Street Journal.
When Apple came out with the iPad, it allowed publishers to set book prices as long as Apple got a 30 percent cut and publishers offered their lowest prices through Apple.
This so-called agency model spread throughout the e-book industry. It overtook Amazon.com Inc. (AMZN)’s wholesale model of buying books at a discount from publishers and then having Amazon.com set the price of books being read on its Kindle tablet.