'US government has told Apple and US publishers where the buck stops'

12 April, 2012

Apple and major US-based publishers and the US Justice Department reached an agreement on April 11 after the former were sued for working as a cartel in 2010 to raise the prices of e-books to break the monopoly of Amazon. It might seem that Amazon is right back on top after the negative US ruling but it also suggests that there is a sense of stability in the US e-books market.

IN WHAT is now known as the “$9.99 problem”, Apple and major publishers Lagardere SCA's Hachette Book Group, News Corp's HarperCollins Publishers Inc, and CBS Corp's Simon & Schuster Inc. will be paying customers $51 million in total for charging more per book when Apple and the publishers colluded with each other to raise the prices by $2-3 per e-book.

Apple and the publishers wanted to break the monopoly of Amazon and entered into an “agency style” agreement with each other in which the publishers sold e-books at a higher cost with Apple taking a 30 per cent commission. This artificially raised the price of e-books above the 9.99 mark, resulting in customers paying more for each e-book, reported Reuters.

The US Justice Department has evidence that senior executives including Steve Jobs, met with each other frequently and secretly in 2010, to find ways to destroy Amazon’s monopoly over the e-books market. They also purposefully followed procedures to erase evidence of meetings and correspondence.

All the effort to “de-cartelize” by Apple and publishers has come to a nought as now the “9.99 problem” remains in the industry and publishers and e-book reader manufacturers will have to go back to be even more price-competitive in this price-sensitive market.

The fierce turf war in the US has one sure winner – the e-book reader - as now Amazon is planning to cut its prices even more. “If Amazon’s model is working for it and it is managing profitability within the legal framework, then it is the competition that needs to do better. The US market is very competitive and increasingly technology oriented,” the writer of Love on the Rocks, Ismita Dhankher, told merinews.

“We may not realize it but the e-book is the future of publishing as it reduces, drastically, the cost of publishing and marketing. E-books augur well for authors as, hopefully, publishers will be able to pay more to writers. So this US judgment is just cleaning of the tables and will result in more even competition. The US government has basically told the US publishers, especially Apple, where the buck stops,” Opinder Nath, who has written books on India and Indian democracy, told merinews.