Apple, publishers face e-book suit

The Obama Administration claims US$2 or US$3 was added to the average price of an e-book. Photo / Thinkstock

The late Steve Jobs conspired with the bosses of the world's biggest publishers to fix the price of electronic books, it was alleged in the United States last night.

The federal government launched legal action against Apple and five book publishers for a scheme that it said jacked up the cost of e-books, not just on Apple's iPad devices but across the industry and the world.

Amazon, whose Kindle e-reader helped popularise digital books, was forced to follow Apple's lead and raise prices. The US Department of Justice investigation unearthed an email from Jobs to the major publishing house bosses in which he discussed a new business model that would allow them to set prices, with Apple taking a cut of almost one-third.

"We'll go to [an] agency model, where you set the price, and we get our 30 per cent, and yes, the customer pays a little more, but that's what you want anyway," Jobs allegedly wrote.

The US lawsuit coincided with developments in a parallel investigation in the European Union, which could bring down e-book prices in the UK. The EU said it had received "proposals of possible commitments" from Apple and four international book publishers.

The EU launched its investigation in December, several months after the US Department of Justice began its inquiry.

According to the lawsuit filed yesterday, executives at the publishing houses spoke regularly and met at "upscale Manhattan restaurants" to discuss Jobs' offer.

They took pains to cover their tracks, ordering certain emails be "double deleted".

The cost of the scheme to shoppers could be as much as US$100 million ($122 million), according to Connecticut Attorney General George Jepsen.

Eric Holder, the Obama Administration's Attorney-General, said US$2 or US$3 was added to the average price of an e-book. "We believe that consumers paid millions of dollars more for some of the most popular titles," he said.

Apple's entry into the e-book market, with the launch of the iPad and the related iBookstore in 2010, revolutionised the market.

Until then, Amazon's e-book store operated like a high street bookshop chain, paying a wholesale price and then selling e-books at a price of Amazon's choosing. To boost sales of the Kindle in the US, they were being sold at a knock-down price of US$9.99.

That was a figure the publishers thought was too low. Apple's "agency" model would allow publishers to set the customer price directly, at whatever level they wanted.

The business agreement, which all the publishers signed within days of each other, stipulated that they would not let anyone else sell e-books for less than Apple.

The UK's Pearson Group, owner of Penguin books, is among the five publishers sued in the US. The others are Macmillan, Hachette, Simon & Schuster and Rupert Murdoch's HarperCollins. The last three immediately agreed settlements with the US Government.

- Independent