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The DOJ’s concern is that this fixed pricing model, adopted by five of the big six publishers, has reduced competition in the e-books industry and raised e-book prices for consumers.
Following the dead-tree book model, e-books were traditionally sold to retailers under a wholesale model. “[P]ublishers and retailers negotiated a fixed cost per unit, and retailers are then free to charge customers whatever they like,” explains Wired’s Epicenter blog. “But wholesale pricing causes two problems for publishers: it gives market leaders (read: Amazon) disproportionate negotiating power, and makes it possible to use heavily discounted e-books to boost sales figures, capture market share and sharply undercut sales of printed books.”
That’s when the late Steve Jobs, then-chief executive of Apple, introduced the agency model, under which publishers set book prices and Apple takes a 30 percent cut. According to the WSJ, “Apple also stipulated that publishers couldn’t let rival retailers sell the same book at a lower price.”
Hence the price fixing lawsuit.
What’s ahead? Publishers will likely want to reach a settlement soon – which may involve modifying or completely eliminating the agency model.
It’s too early to tell what a settlement might look like for consumers but it’s likely to translate to lower e-book prices.
Husna Haq is a Monitor correspondent.