updated 02:25 pm EDT, Wed April 11, 2012
DOJ starts lawsuit to force fair e-book prices
(Updated with settlement news) As suspected, the US Department of Justice has sued Apple and publishers over claims of unfair e-book pricing. The complaint accuses Apple of colluding with publishers by both requiring a switch to an agency model, where publishers set the prices and ask for more, as well as demanding "most favored nation" status where no rival could have a lower price than the iBookstore. Some publishers are believed to have settled, but Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster are all targeted.
Apple and Macmillan are believed to be the only two companies that didn't participate in negotiations, but the lawsuit indicates that none of the major outlets had reached a settlement before the DOJ action. A late update from Bloomberg has cited a pair of sources claiming Hachette, HarperCollins, and Simon & Schuster could settle as soon as Wednesday.
DOJ officials are primarily concerned that Apple's e-book deal, made ahead of the iPad launch, is keeping e-book prices artificially high. Apple has asserted that Amazon had near-monopoly market share of e-books at the start of 2010 and that the pricing change helped level competition, not just for Apple's iBookstore but for Barnes & Noble's Nook Store and other digital peers. Amazon isn't considered innocent in the case as it was regularly accused of price dumping at the time, selling books below cost to squeeze out competitors that couldn't afford to lose money.
Apple's rationale for holding out isn't clear. If aware that most publishers are likely to settle, it may not have much choice but to face a penalty if it decides against settling on its own. DOJ officials may not block the agency model, but they will likely demand Apple give up the most favored nation clause and let Amazon, Barnes & Noble, and others charge less.
Update: Court filings reportedly show that Simon & Schuster, Hachette, and HarperCollins have already settled.