The Justice Department has filed suit against Apple and five major book publishers over alleged collusion in eBook pricing.
The publishers — Hachette SA, HarperCollins, Macmillan, Penguin and Simon & Schuster — had been warned of the antitrust suit. Some of the publishers are expected to settle, but Apple, Penguin and Pearson have all given indications that they will fight the Justice Department in court.
Matt Yglesias has a good rundown (and takedown) of the industry's machinations at Slate. A summary: to gain leverage against Amazon in the digital book market, Apple offered publishers the ability to set prices. The move was an attempt to make their platform more appealing to the major publishers beholden to Amazon's low price structure, which had been designed more to sell Kindles than to sell books.
But the Justice Department alleges that Apple didn't just offer this service but colluded with the publishers to increase the price of eBooks. If Apple becomes a major player in the eBook market, and it allows publishers to set artificially inflated prices, those prices become the industry norm, disadvantaging both competitors and consumers.
Yglesias blogs today that the Justice Department's suit strangely focuses on the part of the publishing industry (the traditional publishers) endangered by the digital technology, at the advantage of the purveyors of the new technology who have the highest ability to create a stranglehold on the price of eBooks:
Suppose these six firms forgot about shady cartelization meetings and just submitted papers to merge. Back in 1982, the Antitrust Division would have to say no way. A book publishing monopoly would have retailers and authors under their thumb, and there would have been massive barriers to entry into the business of publishing and distributing books. Today the landscape is totally different. The price-fixing conspiracy you'd worry about is one between Apple, Amazon, and Barnes & Noble who between the three of them dominate the distribution channel.
One upside of Apple's entrance to the digital book market is it breaks up Amazon's monopoly, which threatened both the future of both eBooks and books in general. However, replacing a monopoly with a multi-corporation collusion doesn't do all that much good.
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