The Department of Justice has recently issued a warning to the various agencies involved in deals with e-book publishers stating that there could be an antitrust lawsuit. This comes right after a deal of possible anticompetitive nature between Apple and book publishers. As per a report which has been published in the Wall Street Journal on Thursday, letters have been sent out by the federal prosecutors to five of the major publishing companies and Apple stating as notifications that they would soon be actively taking up a case of price fixing and collusion which could result in charges similar to that of a class action law suit. Though the direction in which these proceeding will go is uncertain at the moment, the only thing which is certain at the moment is the fact that the prices of e-books on Apple devices at least are going to take a nose dive.
The issue at hand finds its roots in 2010, when Apple was gearing for the iPad release. During that time, major e-books were published via retailers such as Amazon who made deals with the publishers at wholesale prices and maintained a ceiling on the price of the e-books in order to ensure that the demand for the books would remain consistent. Most of the books were set at prices less than $9.99 on Amazon. This however meant that the publishers would have to share their profits with the retailer, reducing their margins.
Not all publishers were pleased with the price ceilings introduced by Amazon, with a few publishers even backing out of the deal. Amazon immediately retaliated by taking all books from the stores of these publishers offline. This was the point where the battle between the publishers and the online retailer reached its peak and at this point, Apple made an entry. Apple came up with their own e-book model wherein publishers were given the freedom to set up their e-book store on the iOS platform along with complete independence to set their own prices for their e-books.
This policy of publishers and authors trying to maintain a higher price for their books seems to be misguided with studies showing that book sales are higher for authors who have a lower price for their e-books. Analysts believe this latest move from the DoJ will act as a catalyst to massive price cuts in e-books, especially on Apple devices.