The Justice Department could sue Apple as early as Wednesday over e-book price fixing, Reuters reports, citing "two people familiar with the matter."
No final decision has been made, Reuters reports, and it said Apple declined comment. In a similar story, Bloomberg reports Apple and Macmillan, one of the publishers that would be expected to also be a party to such a suit, "are preparing to be sued as early as today." Bloomberg, too, cites "two people familiar with the matter."
Apple and five of the “Big Six” trade publishers are reportedly under investigation over staggered — but identical — moves to an agency rather than a wholesale pricing model. The difference can have a huge impact on the price that e-book retailers — like, but not exclusively Apple — can charge for titles.
Under a wholesale pricing model a seller can effectively charge anything it likes, and even take a loss, as long at it pays the wholesaler (the publisher) an agreed price. Amazon famously tried to press the limits of its wholesale pricing model by charging $10 or less for most e-books. But it was forced to back down under intense pressure from publishers, and Apple's entry into the business, with iBooks.
The legal concern relates to the possibility of collusion among nearly all the major publishers, which would introduce an monopoly effect on the retail cost of books. Publishing is made up of legally sanctioned mini monopolies anyway, since a given title is available only from one and, unlike cars, there are no equivalents per se from another. But if the major publishers were to collude, then any semblance of competition would disappear, and the market would have little say in the pricing of books at all.
One significant wrinkle unique to the digital market: retailers may be just fine with razor thin margins for e-books they merely convey in order to sell e-book readers they manufacture, as do Amazon and Barnes & Noble. Because of e-books' DRM, those devices effectively lock in readers to a single store. That's worth much more to a retailer than the profit margin on any particular e-book.
As reported by my colleague Tim Carmody, the DoJ’s investigation and a related civil lawsuit touch on issues bigger than rising e-book prices or even collusion between publishers. The cases are also about who has the right to sue e-book publishers, the nature of publishers’ bilateral interactions with Apple and other retailers, and whether it’s even possible for a true agency model to exist for virtual goods like e-books.
Photo: Screenshot from 2010 Steve Jobs iPad keynote introducing iBooks
