E-book pricing subject of federal lawsuit

The US Justice Department is preparing to sue Apple Inc. and five publishing houses for collaborative pricing, sources told The Wall Street Journal. The case involves Apple's agreement with publishers to use an agency model pricing system in which the publishing house sets the price for an e-book and Apple, when it sells a book, keeps 30 percent of the revenue, the Journal said. That deal includes an agreement between Apple and the publishers that other booksellers would not be allowed to sell the book at a lower price, the Journal reported Wednesday. The alternative system would be what is called the "wholesale model," in which the publishers sell the book at a discount to retailers, who can then sell the book at whatever price they like, staying with or disregarding the recommended price that is printed on the cover. But Apple and other booksellers shunned the wholesale price, because they feared Amazon.com, which put steep discounts on e-book prices. The e-book sale at Amazon was, essentially, at a loss so Amazon could entice readers into buying its tablet reader, the Kindle Fire. Publishers and retailers feared Amazon could dictate prices on its own as it tried to establish itself as the marketplace for both tablets and e-books. The five publishers involved in the case are Simon & Schuster Inc. Hachette Book Group; Penguin Group (USA), Macmillan, and HarperCollins Publishers Inc., the Journal reported.