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Apple, five publishers sued over e-book pricing

Apple's iBooks 2 app on an iPad in New York City. Federal and state prosecutors alleged Apple and five big publishers conspired to raise e-book prices to wage battle against Amazon.

Kai Ryssdal: This being capitalism, you can charge what you like for whatever it is that you sell. High, low, whatever the market will bear.

What you can't do is get together with your competitors and fix prices. A conspiratorial secret handshake, if you will. Today, the Justice Department accused Apple and five big publishers of doing exactly that in the e-book market, and in the process costing consumers millions of dollars. Three of the publishers settled.

Apple, along with Penguin and Macmillan, are going to court. Marketplace's Sally Herships has more.


Sally Herships: Here are some cliffs notes on the Department of Justice’s Case against Apple and all those publishers. First, you need to know that e-books, which are generally cheaper than the standard paper ones,  are selling really well.

Sarah Weinman: Especially in the last 18 months, they have been rising at an exponential clip.

Sarah Weinman is news editor for Publishers Marketplace. She says for many publishers e-books now account for as much as 20 percent of sales. Next fact: There are two ways to price a book. One, when retailers buys wholesale and sets the price. The second is when publishers set the price and retailers can’t change it. They still get a cut. That’s called the agency model.

Oren Teicher: Pre-agency one company totally dominated the e-book business.

That’s Oren Teicher, CEO of the American Booksellers Association. The one company he’s talking about is Amazon. It was selling e-books for less than what it paid for them. The government says Apple and  five publishers set prices for e-books on iTunes. Three of the publishers have agreed to settle the lawsuit without admitting wrongdoing. They’re also ending agency pricing. Teicher says Amazon could lower prices again.

Teicher: You can have customers have access to e-books at a lower cost for a period of time but then when they drive out all of the competition and they’re the only ones left, what happens then?

Amazon says it looks forward to being allowed to lower prices. Apple had no comment.

In New York, I’m Sally Herships for Marketplace.

About the author

Sally Herships is a regular contributor to Marketplace.
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"What you can't do is get together with your competitors and fix prices. "

I don't think OPEC got this memo.

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