The US Justice Department has taken Apple and two major publishers to court for conspiring to push up the prices of ebooks, while three other publishers have agreed to settle the government's charges.
US attorney general Eric Holder told a press conference that the proposed settlement would give retailers such as Amazon and Barnes & Noble the freedom to reduce ebook prices.
The lawsuit, filed in the US District Court for the Southern District of New York today, said the conspiracy has caused ebook consumers to pay "tens of millions of dollars more for ebooks than they otherwise would have paid."
The government alleged that Apple and the publishers had a common interest in fighting Amazon.Com's practice of selling e-books for as little as $9.99, and decided to work together to raise prices by switching to an "agency" model where the publishers set the prices.
"To effectuate their conspiracy, the publisher defendants teamed up with defendant Apple, which shared the same goal of restraining retail price competition in the sale of e-books," the Justice Department complaint said.
Apple has not been part of the settlement negotiations, a person familiar with the matter had told Reuters.
The two publishers the Justice Department is proceeding to litigate against are Pearson's Penguin Group and Macmillan.
News Corp's HarperCollins, CBS's Simon & Schuster and Lagardere's Hachette Book Group agreed to settle with the Justice Department. The settlement terms were not immediately disclosed.
Macmillan chief executive John Sargent said in a letter made public today that settlement terms demanded by the Justice Department "were too onerous." He also said Macmillan did not act illegally and did not collude.
Apple and the other four publishers could not immediately be reached for comment.
The Justice Department complaint cites an email from an executive for an unnamed publisher pointing out the need for the publishers to work together to convince Amazon to raise prices.
"We've always known that unless other publishers follow us, there's no chance of success in getting Amazon to change its pricing practices," the executive wrote.
"Without a critical mass behind us, Amazon won't 'negotiate,' so we need to be more confident of how our fellow publishers will react," the executive said in the email.
The European Union is also investigating allegations of conspiracy to fix the prices of ebooks.
The Justice Department has been looking into whether deals Apple cut roughly two years ago, when it launched its iPad tablet computer, with the quintet of publishers were done with the intent of propping up prices for ebooks, people familiar with the matter have said.
As part of those agreements, publishers shifted to a model that allowed them to set the price of ebooks and give Apple a 30 per cent cut of sales, the sources have said. Amazon had been paying publishers for the books, and then discounting them to win market share.
Reuters