Apple Inc. (NASDAQ:AAPL) was sued this morning by the U.S. Department of Justice. The case relates to the company’s publishing platform e-Books which the government believes violates antitrust laws. The suit named the giant tech company and several publishers as defendants. Apple and several of the two of the publishers have vowed to fight on but two publishers decided to settle with the Department of Justice. The three firms, Simon and Schuster, Hacette and HarperCollins, have reached a settlement with authorities and some of the details pertaining to it were released in a statement by US Attorney General earlier today. The news was revealed on CNN today.
That settlement will give the three publishers the right to reduce the price of their titles when selling them wholesale. Other aspect of the settlement were not touched upon during the press conference. In the court case the United States was seeking restitution of $51 million but there was no information given on whether or not there was a monetary settlement from the three publishers today. The settlement will ostensibly allow Amazon, the former big power in the ebook trade, to return to its wholesale model. Amazon used to use a model more like a traditional bookstore whereby it bought books from publishers and set them at the prices it chose. Apples platform allows publishers to set their own prices while the company takes a 30% cut of sales.
The settlement is an interesting one and if more details emerge could reveal a lot more about the future of the legal case between Apple and the two remaining publishers who have vowed to fight the charges. Those companies maintain that Apple’s model actually increases competition in the market rather than eliminating it as a trust would. Macmillan’s CEO has been publicly vocal on the point. He released an open letter today that explained his position on the suit and argued against the governments position.
That letter reveals that discussions between the publishers and the Department of Justice for months. He says that Macmillan moved to the model despite the lower revenue. The reason given was the encouragement of a free and open market in ebook publishing. The veracity of the statement, given in full at 9to5mac.com, is up for discussion but the effect this suit will have on the market is not. Apple’s publishing platform has changed the way ebooks are sold and now that model is under attack. The outcome will be interesting.