In April the US Government’s Department of Justice accused Apple and publishing houses Hachette, HarperCollins, Macmillan, Simon and Schuster and Penguin of colluding over the prices of e-books.
In order to sell through Apple’s iBooks app the publishers adopted the Agency pricing model under which publishers set the final retail price and pay the retailer a commission.
They subsequently extended the model to other retailers including Amazon’s Kindle store.
The DOJ is accusing the companies of colluding, a claim all deny.
Simon & Schuster, Hachette and HarperCollins have settled with the DoJ leaving Apple, Macmillan and Penguin to defend their actions in court.
All three deny any wrongdoing and have made clear their determination to fight the charges against them.
In their court statements both Penguin and Macmillan cite the dominance of Amazon’s Kindle eReader as part of their decision to adopt Agency.
Denying any collusion with other publishers, Macmillan’s statement says Apple offered to sell its books under the Agency Model on a “take it or leave it” basis and that it decided to so without reference to other companies.
The company says it did so because the wholesale model, under which retailers set prices had “led to Amazon’s monopolization of eBook distribution.”
“Charging below wholesale prices, Amazon erected impenetrable barriers to entry for meaningful competition in eBook distribution, thus protecting its more than 90% share of the business.”
Macmillan’s filing goes on to claim that pre-Agency, US retailer Barnes & Noble “lacked the long-term ability to sustain competition in the face of Amazon’s below cost pricing of many New York Times bestseller ebooks”.
Adoption of Agency led to “vigorous rivalry” including falling eReader prices and B&N regaining “the ability to compete long-term for eBook sales.”
Macmillan also says Agency leads to lower profits and margins for publishers.
In its response, Penguin says Agency and the arrival of Apple’s iBookstore “prevented Amazon from cementing itself as a monopolist” and accuses the DOJ of ignoring the competition gains brought about by Agency.
Penguin also says that Amazon’s low prices “was a successful strategy for locking consumers into its proprietary Kindle platform and raising a significant barrier to entry.”
The company also insists that “Under the agency model, price competition has moved from the retail level to the publisher level. Price and non-price competition both among publisher and among eBook retailers has exponentially increased as a result of the move to the agency model.
“For example,there is more dynamic pricing of eBooks, which has resulted in lower consumer prices on many, many eBook titles, more robust competition at the device level in terms of both the cost and variety of eReading devices, handsome and imaginative enhanced, full-color eBooks, which did not even exist as a category before Apple introduced the iPad, and more vibrant and differentiated marketing of eBooks by Penguin’s agents, all to the benefit of consumers.”
Despite the mentions of Amazon in the court documents the online retailer is not part of the court action and the DOJ have filed no claims against it.
