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04-01-2012, 06:59 PM #1
Apple and Publishers Want to Settle Department of Justice Collusion Lawsuit
Reuters is reporting Apple and some of its largest publishers are looking to settle of Department of Justice lawsuit accusing the parties involved of collusion.
Earlier this year the U.S. DOJ levied a suit against Apple and some of its major publication partners accusing the parties involved of collusion in an effort to drive up e-book prices. Reuters is claiming sources close to the case indicate Apple and its partners want to alter some of the wording used in their contracts with publishers and retailers to avoid a long litigation process.
One particular section of Apple’s contracts has come under particular scrutiny. The clause in question states that the price of an electronic book published using Apple’s iBookstore cannot be higher than any other iteration of the same content at other retailers. The clause thus far has prevents Amazon and other competing retailers from undercutting Apple’s iBookstore in terms of e-book prices.
The “agency model” introduced by Apple and its publishing partners has come under scrutiny as well. The agency business model allows publishers to prices for their content for retailers disallowing market flexibility and allowing companies like Apple to take a 30% cut from each sale. Publishers presumably accepted Apple’s terms in an effort to prevent Amazon from stealing sales away from traditional book sales with undercut digital copies.
The settlement, which is expected to be reached in the next few weeks, will include the elimination of the agency model wording in contracts between Apple and publishers. As a result Amazon should be able to gain over $1 billion in revenue according to Cowen & Co analyst Jim Friedland.
Competition in the E-book market is good for consumers and even better for those e-book resellers that were effectively run out of town when Apple announced the agency model. Hopefully, a reemergence of alternatives to iBooks and Amazon emerge as a result.