The Justice Department has issued a warning to Simon and Schuster, Hachette Book Group, Penguin Group, Macmillan and HarperCollins as well as Apple, that it may sue over the “agency model” for pricing ebooks to consumers, which Justice says may violate anti-trust laws.
The “agency model” (publishers set the price and the seller takes 30%) was introduced to counter Amazon’s approach of selling ebooks for $9,99, often at a loss, which publishers regarded as an attempt to establish a monopoly. The publishers who adapted the agency model, then told Amazon that they would only sell them ebooks under that model.
Booksellers were also concerned about Amazon’s approach. As The Wall Street Journal notes,
William Lynch, chief executive of Barnes & Noble, gave a deposition to the Justice Department [last december]in which he testified that abandoning the agency pricing model would effectively result in a single player gaining even more market share than it has today, according to people familiar with the testimony.