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The US Justice Department has warned Apple and 5 major publishers that it is planning on suing them for collaborating to raise the price of electronic books.
A Justice Department lawsuit over e-book pricing is on the horizon for Apple and five major US publishers, the Wall Street Journal reported.
The Justice Department warned the companies that they would face legal action for collaborating to raise electronic book prices, the Journal found.
The five publishers involved in the case are Simon & Schuster, Hachette, Penguin, Macmillan, and HarperCollins. Some of the publishers are in talks to settle the potential anti-trust case, which could result in cheaper e-books for consumers, Reuters reported.
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Traditionally, publishers sold physical books for half the cover price, which enabled retailers to set their own store price, Slate reported. However, when Apple introduced its first iPad in 2010, the company moved to an "agency" model, allowing publishers to set book prices and give Apple a 30 percent cut, which upset many publishers.
Apple also reportedly stipulated that publishers couldn't let rival retailers like Amazon sell the same book for less, which made the agency model an industry standard, Slate reported.
Justice Department lawyers argue that both Apple and the publishers violated federal antitrust laws by putting their e-book plan in place, the Journal reported.
Apple and all five publishers declined to comment on the proceedings, as did the Justice Department, according to the Journal.
The publishers have denied acting together to raise prices, Reuters reported. They told investigators that the shift to the agency pricing model enhanced competition in the industry and allowed electronic booksellers to thrive.
In December, the European Union opened formal antitrust proceedings to investigate whether the same publishers had “engaged in anti-competitive practices affecting the sale of e-books” in Europe, the Washington Post reported. The announcement of the lawsuit came after a series of surprise raids at e-book companies last March by European antitrust officials, according to the Post.
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