« Higher Ed Open Textbook Provider Sued by Publishers. K-12 Implications? | Main | New Study Analyzes Spending of For-Profit Charter Schools »

U.S. Files Suit Against Apple, Publishers Over E-Book Pricing

| No comments

The U.S. Department of Justice filed an antitrust suit against Apple Inc., and five of the "Big Six" book publishers today over e-book prices. The DOJ alleges that the publishers (Hachette Book Group Inc., HarperCollins Publishers L.L.C., Macmillan, Pearson's Penguin Group, and Simon & Schuster Inc.) and Apple entered into illegal pricing agreements that artificially jacked up e-book prices in order to prevent retailers (mainly Amazon) from devaluing them.

What's worth noting here is that the "Big Three" of textbook publishers—McGraw-Hill Education, Houghton Mifflin Harcourt, and Pearson—are not named in the suit, even though Pearson's Penguin division is targeted. That's because the suit is related to trade e-books, or consumer books, which don't include textbooks, children's pictures books, or reference materials. Those products are "sold through separate channels, and are not reasonably substitutable for trade e-books," the suit says (read a PDF of it here, via The Wall Street Journal).

In their January deal with Apple to publish e-textbooks, Pearson, McGraw-Hill and Houghton Mifflin Harcourt agreed to offer the books at $14.99. But the textbooks are mostly purchased by schools or school districts, with individual licenses given to each student each school year.

Typically, publishers sell their consumer e-books to retailers, like Amazon or Apple, for about half the list price and the retailers, in turn, sell the books through their stores, ultimately ending up on e-readers, the suit explains. Because Amazon would offer those books for $9.99, the books became devalued.

The DOJ alleges that the publishers held several clandestine meetings and "conspired" to turn that trend around; eventually, Apple stepped in. In what is known as an "agency" pricing model, Apple allowed publishers to set their own e-book prices on iTunes and iBooks, in exchange for a 30 percent cut of each sale and a promise to not offer the books to other retailers at a lower price, the suit says.

The agency model alone isn't illegal, it's the alleged collusion, Acting Assistant Attorney General Sharis A. Pozen said in a statement today.

"When companies get together and conspire to enter into agreements that eliminate price competition, it crosses the line," she said.

Three publishers—Hachette, HarperCollins, and Simon & Schuster— have already agreed to settle, Pozen said. Apple, Penguin, and Macmillan have not. In a statement, Penguin/Pearson questioned the DOJ's claims and asserted that the company acted alone in using an agency pricing model, preventing a "monopoly."

"The agency model is the one that offers consumers the prospect of an open and competitive market for e-books," the statement said. Pearson officials did not immediately respond to an email asking to clarify potential e-textbook implications.

The Department of Justice wouldn't comment beyond its public statements. McGraw-Hill and The Association of American Publishers declined to comment. Houghton Mifflin Harcourt did not respond to requests for comment.

You must be logged in to leave a comment. Login | Register
Ground Rules for Posting
We encourage lively debate, but please be respectful of others. Profanity and personal attacks are prohibited. By commenting, you are agreeing to abide by our user agreement.
All comments are public.

Follow This Blog

Advertisement

Most Viewed on Education Week

Categories

Archives

Recent Comments