The Justice Department has looked at the method in which ebooks are priced and doesn’t like what it sees. Apple and five major publishers are at the heart of the controversy—a pricing method and potential antitrust violation called “the agency method.” Publishers set the price and all the players get their cut. This was designed as a way to get at big, bad Amazon.com, the Honey Badger of the industry, which prices books as it pleases — and wants to sell ebooks more cheaply to fuel sales of its Kindle products.
Of course, the practice is standard. I set the selling price on my ebooks, too. The agency method is actually a boon to independent authors, since it allows them to set their prices low to help build sales when they don’t have a traditional publishers’ marketing clout. For example, right now, I’m running a promotion, setting the price of one of my books at 99 cents. If the agency model was abolished, I could sell my books to retailers for 50 cents and hope they sell them for 99 cents, but they might decide instead to sell them for $9.99. Fewer books would sell, and I’d still nly get 50 cents. So, if the e-tailers moved away from the agency model, it could take away independent authors’ pricing flexibility, which would be bad both in the short and long term.
But underpricing isn’t the problem the Justice Department and others are looking at right now.
An antitrust case is pending. Reuters has more:
In a parallel class action lawsuit now in a Manhattan court, Apple is accused of working with publishers just before its iPad was launched in 2010.
The suit brought on behalf of e-book customers, alleges Apple and the publishers colluded to shift e-book pricing from a wholesale method, where retailers pay for the product and charge what they like, to agency pricing, where publishers would tell retailers what they can charge.
The class action lawsuit, filed by law firm Hagens, Berman, Sobol, Shapiro, LLP, accuses Apple of being a “hub” for collusion.
Apple’s push for agency pricing was detailed in Walter Isaacson’s biography of Apple founder Steve Jobs.
The book says that Jobs, who died in October, was aware of publishers’ frustration with Amazon. It quotes Jobs as saying: “So we told the publishers, ‘We’ll go to the agency model, where you set the price, and we get our 30 percent and yes, the customer pays a little more but that’s what you want anyway.’ … So they went to Amazon and said, ‘You’re going to sign an agency contract or we’re not going to give you the books.'”
To read the full article, click here.