Apple warned about suit over eBook price fixing

March 8, 2012 9:01:06 PM PST
One day after releasing its new iPad, Apple is under fire. The company is accused of conspiring with publishers to keep prices high for electronic books.

It all centers on Apple's agreement with the five biggest book publishers to sell books for the iPad. The Justice Department claims it might violate anti-trust laws by forcing book prices higher on other platforms like the Amazon Kindle.

When Steve Jobs unveiled the iBooks bookstore for iPad users, it was the first major competition to Amazon and its Kindle e-reader. And as part of that competition, Apple made a deal with the five biggest book publishers intended to level the playing field.

"Publishers agreed not to sell that content through any other e-reader provider at a lower cost," Golden Gate University Business Professor Terry Connelly said.

Connelly says at the time, that deal was a good thing. It was probably the only way Apple could survive against Amazon. But in the past two years the market has changed.

"Now you can buy paperbacks cheaper than you can buy some of these products through Apple on an e-reader basis," Connelly said.

And customers are becoming fed up.

"If I'm going to pay full price then I'll buy it in paper," e-book customer Bach Payson said.

In fact, $9 is the low end of what you'll pay to download a book from Apple. Many are $12 and up.

Another e-book customer says he buys most of his e-books from Amazon, not Apple. But the prices there are equally high because publishers agreed no one can sell their books for less than Apple.

In his biography, which sells for $15 on iBooks, Steve Jobs says he knew that would make Amazon's prices go up and that publishers would be just fine with that.

One advocate for a free market says he has no problem with that.

"If they're pricing it too high, customers will look for substitutes, they'll buy less of it and they'll lose money," Ayn Rand Center for Individual Rights fellow Don Watkins said.

Watkins points out e-books are the fastest growing segment of publishing -- high prices and all.

"What governments doing is it's stepping in and dictating 'Well no, we know what the correct price will be,'" Watkins said.

And the government may get its way. Connelly says it's likely Apple and the publishers will settle out of court by voluntarily lowering their prices. And that means the real winners could be consumers.


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