Justice Department Warns Apple, E-Book Publishers: We'll Sue You

The U.S. Justice Department is inching closer to legal action against Apple and five e-book publishers who are reportedly pricing books under an “agency model” that isn’t the greatest for consumers. The government is threatening to take legal action if the issue isn’t resolved soon.

The Wall Street Journal says several of the publishers have been in talks to settle the antitrust case. It that is successful, it could mean lower e-book prices for customers.

Back when Apple was readying the iPad in 2010, publishers were concerned they’d go the way of record companies when iTunes started selling songs for 99 cents each. So former CEO, the late Steve Jobs, suggested they move from the wholesale model, where booksellers offered books to customers for less than the cover price if they wished, and toward the agency model.

Under the agency model, publishers would set the price of the book among themselves, and then Apple would nab a 30% of that price.

“We told the publishers, ‘We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you want anyway,'” Mr. Jobs was quoted as saying by his biographer, Walter Isaacson.

The Justice Department thinks this violates federal antitrust laws, and that Apple and the publishers banded together to raise prices for consumers in the U.S. The publishers have denied this, saying they were enhancing competition by letting e-book sellers to thrive.

U.S. Warns Apple, Publishers [Wall Street Journal]