Justice Dept. to sue Apple, other publishers over e-book 'cartel'

U.S. authorities are following the Europeans' lead by paving the way to sue Apple and other big publishing names, after they were found to be 'fixing' e-book prices.

Three months after European antitrust authorities announced it would investigate the 'cartel' practices of e-book publishers, including Apple and other big names in the industry, U.S. authorities have warned that it plans to sue over allegations of collusion of e-book pricing.

Apple, along with Simon & Schuster (ZDNet and Simon & Schuster are both owned by CBS), Hachette, HarperCollins, Macmillan and Penguin are in the U.S. Department of Justice's crosshairs after a European Commission investigation found anti-competitive practices.

The Wall Street Journal, speaking to people familiar with the matter, said that several of those involved held talks to settle the antitrust case before it reaches the courts.

A successful suit would result in cheaper e-books for all, in the U.S. and in Europe's 27 member states.

This comes only a day after Apple's third-generation iPad, with its e-book platform on board, was announced at a special event in San Francisco by chief executive Tim Cook.

The case centers around 'agency pricing', where Apple in this case would take a 30 percent cut of each sale, rather than the 'wholesale' method Amazon uses, which would give publishers more flexibility in their pricing, and even offer some e-books at a loss. Apple is thought to have included a clause that would prevent publishers from allowing their rival retailers to sell the same book at a discounted price.

A publishing executive told the Journal that a settlement is "being considered for pragmatic reasons", but that the parties involved are "by no means close".

The publishers had previously denied acting together to raise prices.

Apple's education event in January gave Mac users the tools to create e-books from home or work, and publish them on the iBookstore. Students were also given a new category in the iBookstore to access academic material at a greatly discounted price.

But this was met with initial controversy after it was found that Apple could restrict what authors do with their work, even if the e-book was not allowed into the iBookstore. ZDNet's Ed Bott has more on this.

Image source: Luiz Filipe Carneiro Machado/Flickr. Article source: Wall Street Journal.