Apple (AAPL) Publishers May Get Sued by U.S. DoJ in Book Pricing Scheme
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According to reports out Thursday, the U.S. Justice Department is planning to file an antitrust lawsuit against Apple (Nasdaq: AAPL), CBS Corp.'s (NYSE: CBS) Simon & Schuster Inc. Lagardere SCA's Hachette Book Group Pearson PLC's (NYSE: PSO) Penguin Group (USA), Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH, and HarperCollins Publishers Inc., a unit of News Corp. (Nasdaq: NWSA).
Traditionally, publishers sell books for about half of MSRP prices, allowing retailers to offer the books at a discount should they choose to do so. Then, Amazon.com (Nasdaq: AMZN) began selling e-books for $9.99 a few years ago, encouraging adoption of its Kindle e-Reader. Publishers didn't like the idea for fear of consumers becoming used to the lower-priced offerings.
As Apple was about to release its iPad, late CEO Steve Jobs wanted to switch to an agency model, whereby publishers would price books and Apple would just take a 30 percent cut. Apple also ensured publishers wouldn't allow rivals to sell the same book at a lower price.
The Justice Department now believes Apple and the publishers were cohorts in sort of a "price fixing" scheme, driving prices up industry wide.
There is a possibility of Apple and the publishers settling out-of-court, though talks are said to have gone through many turns.
Barnes & Noble (NYSE: BKS) CEO William Lynch put it best in saying refusal of his or other companies to sign the agency agreement would effectively turn the book market into a monopoly.
None of the companies have commented on the reports.
Traditionally, publishers sell books for about half of MSRP prices, allowing retailers to offer the books at a discount should they choose to do so. Then, Amazon.com (Nasdaq: AMZN) began selling e-books for $9.99 a few years ago, encouraging adoption of its Kindle e-Reader. Publishers didn't like the idea for fear of consumers becoming used to the lower-priced offerings.
As Apple was about to release its iPad, late CEO Steve Jobs wanted to switch to an agency model, whereby publishers would price books and Apple would just take a 30 percent cut. Apple also ensured publishers wouldn't allow rivals to sell the same book at a lower price.
The Justice Department now believes Apple and the publishers were cohorts in sort of a "price fixing" scheme, driving prices up industry wide.
There is a possibility of Apple and the publishers settling out-of-court, though talks are said to have gone through many turns.
Barnes & Noble (NYSE: BKS) CEO William Lynch put it best in saying refusal of his or other companies to sign the agency agreement would effectively turn the book market into a monopoly.
None of the companies have commented on the reports.
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