The U.S. Justice Department has officially sued Apple and several book publishers, alleging the companies committed anti-trust infringement through Apple’s agency model, Bloomberg reported. Through iTunes, the company allows publishers to set their own price in exchange for a 30 percent cut in revenue.
Through the lawsuit, the US government strives to make the wholesale model the law of the land for e-books, allowing retailers to set their prices, often offering discounts on best-sellers that cut into the profits of the publishers. It argues that the agency model results in an uncompetitive market.
Three of the five publishers, including CBS’s Simon & Schuster, News Corp.’s HarperCollins, and Lagardère SCA’s Hachette Book Group have already settled in the lawsuit, Bloomberg confirmed in a follow up report.
Apple and MacMillan have refused settlement talks with the Justice Department, and will instead argue that the agency model actually results in better competition against other online book sellers such as Amazon. Penguin is reportedly preparing for a legal battle, according to Bloomberg.
The Justice Department began its investigation into the matter last year, warning all companies involved that it would sue for anti-trust if changes weren’t made.
Random House has agreements with Apple and Amazon to allow book publishers to set the prices for electronic publishing, and thus was not include in the lawsuit.
With the advent of Apple’s iPad in 2010, the company’s agency model surpassed Amazon’s practice of buying discounted books and making money off the e-readers themselves.
Sales of e-books rose 117 percent to generate $969.9 million in 2011, according to Publishers Weekly.