[Small Chirp] Publishers conspire to overcharge for ebooks?

The US Department of Justice has hit Apple and five of the nation’s largest publishers with an antitrust lawsuit, alleging that they colluded to bump up the price of new ebooks, costing consumers millions. Publisher control over retail prices is made possible by a shift towards a pricing model where publishers set book price and retailers take a commission. The conspiracy itself is purportedly aimed at Amazon, which tends to price ebooks at $9.99–three to five dollars under the price rise ($12.99-14.99) the publishers allegedly caused.

Publishers involved:

  • Hachette
  • HarperCollins
  • Simon & Schuster
  • Macmillan
  • Penguin

According to Macmillan, which denies the charges, more is at stake in this exchange than book prices;  if the DOJ is successful in prosecuting this lawsuit, it could enable Amazon to “recover the monopoly position it had been building.” According to the Chief Executive John Sargent of Macmillan, this would have a powerful and detrimental impact on small and large book retailers that aren’t Amazon. In other words, any collusion between publishers was a publically minded move to prevent this Seattle-based multinational electronic commerce company from taking over the sector.

Hachette, HarperCollins and Simon & Schuster have all agreed to a settlement and the conditions. From the 19-page document of legalese, it looks like they agree

  • to terminate any ebook price-setting agreements with Apple,
  • to never again (for two years) limit e-reader retailers’ freedom to set their own prices,
  • to not hunt down or beat up ebook retailers or publishers they don’t like
  • and to notify DOJ of any future attempts at illegal shenanigans.

Macmillan and Penguin plan to go ahead with the lawsuit. According to the Wall Street Journal, there is also a possibility of a separate settlement with the 16 states that have filed their own suits last week, with a potential of seeing tens of millions of dollars going to consumers who had bought ebooks. HarperCollins and Hachette have already agreed to settlements that may have them paying over $50 million in restitution.

This issue harkens back to the sudden drop in ebook lending options last year when many of the big name publishers discontinued the lend-opportunities for their titles.  The chatter on the blogosphere (and a response from publishers) linked the drop to Amazon rolling out its new Kindle book loan features in late 2010.

Chirp, what do you think is going on?

One thought on “[Small Chirp] Publishers conspire to overcharge for ebooks?

  1. With Indie publishers pricing ebooks so much lower than the large publishing houses I don’t know how they aren’t pricing themselves out of the market. Seems they can only get away with that for the A-list authors. Mine is priced at $0.99 since it’s my first one. The sequel will be a whopping $2.99. Well worth the cost of admission, especially when you look at these prices.

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