Publishers rebel against proposed Apple ebook restrictions

If the Department of Justice gets it way, will the future of competition in the U.S. change?
Written by Charlie Osborne, Contributing Writer
Credit: Dave Carnoy/CNET

After Apple was found guilty of violating antitrust laws by conspiring to fix e-book prices, publishers fear they will pay the price.

The U.S. Justice Department (DOJ) found the company guilty in July for conspiring with five publishers to control the price of e-books. The publishers agreed to settle; leaving Apple to appeal on its own.

As a result, the DOJ plans to make sure Apple cannot "conspire to thwart competition in the future" by imposing a number of restrictions. The agency wishes to see all of the five-year contracts between the tech giant and publishers re-signed -- with the stipulation that Apple is barred from competing on price.

The publishers -- Hachette Book Group, News Corp's HarperCollins Publishers, Penguin Random House , CBS's Simon & Schuster Inc and Macmillan -- say that publishers would suffer rather than the iPad and iPhone maker. On Wednesday, they filed a motion with a U.S. district court in Manhattan to protest against the proposals.

The publishers argue that by preventing Apple from being able to enter agency agreements that allow the discounting of titles, they are "effectively being punished." This, in turn, contradicts their own settlements with the U.S. government which still allows them to enter agency agreements with retailers.

"Despite achieving their stated goal of returning price competition, plaintiffs now seek to improperly impose additional, unwarranted restrictions on the settling defendants, thereby depriving each publisher of the benefit of its bargain with plaintiffs," the publishers wrote within their complaint.

The "agency" model, the core issue within the antitrust suit, allows publishers to set the price of e-books instead of the authors. Apple uses this model in the iBookstore and requires 30 percent commission. In contrast, Amazon allows eBook authors to set their own price -- whether at a profit or a loss.

In addition to this stipulation, Apple would be forced to hire an internal antitrust compliance officer and a court-appointed external supervisor. The DOJ would also like to see links to other e-book providers -- such as Amazon -- included on store platforms to make it easier for consumers to make price comparisons.

Despite Apple's continued claims that it did not "conspire to fix e-book pricing," the DOJ called the settlement a "victory for millions" of readers.

A hearing to discuss potential restrictions will be held on August 9.

This post originally appeared on ZDNet.

This post was originally published on Smartplanet.com

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