Uncle Sam charged Apple and two publishers with conspiring to fix e-book prices—claiming, in essence, that CEO Tim Cook (above) got a little too chummy with Penguin boss John Makinson and other publishers. The publishers met and discussed details at posh eatery Picholine. (Bloomberg)
Steve Jobs’ own words are coming back to haunt Apple in a new government crackdown on alleged price-fixing of e-books.
The Justice Department yesterday accused Apple and two publishers of conspiring to rig prices in the fast-growing e-book sector.
The conspiracy, constructed by executives at Penguin and Macmillan and other companies during meetings at posh Manhattan eateries like Picholine, fixed prices of best-selling e-books at $12.99 and $14.99, the federal government alleges.
The industry called the setting of prices by publishers “the agency model.”
The alleged anti-consumer agency model was aimed at knee-capping rival Amazon, which was discounting popular e-books to $9.99.
“We allege that executives at the highest levels of the companies included in [the] lawsuit — concerned that e-book sellers had reduced prices — worked together to eliminate competition among stores selling e-books, ultimately increasing prices for consumers,” Attorney General Eric Holder said at a news conference.
In a legal tour de force, prosecutors will use the late Apple CEO’s own words against the company he built. “We’ll go to [an] agency model,” Jobs once told publishers, according to Uncle Sam’s complaint, “where you set the price and we get our 30 percent, and yes, the customer pays a little more, but that’s what you want anyway.”
Amazon, which dominates e-book sales, said the suit “is a big win for Kindle owners, and we look forward to being allowed to lower prices on more Kindle books.”
Apple declined to comment but earlier said it had not joined in any action with the publishers.
The alleged illegal rigging caused book buyers to overpay for e-books by about $100 million, according to a separate complaint filed by 15 state attorneys general.
Hours after the charges were filed in Manhattan federal court, three major publishers settled charges and agreed not to participate in any price-fixing schemes.
Each agreed to cancel contracts with Amazon, Google and others that allowed them to set prices, court papers said. The three are Hachette, Simon & Schuster and HarperCollins, which is owned by News Corp., parent of The Post.
In a statement, Macmillan Chief Executive John Sargent held his ground, declaring “Macmillan did not act illegally. Macmillan did not collude.”
The publisher refused to settle after months of talks with prosecutors because their “onerous demands” and “terms could have allowed Amazon to recover the monopoly position it had been building before our switch to the agency model,” Sargent said.
John Makinson, Penguin’s CEO, said the firm didn’t settle because it believes it did nothing wrong.
Connecticut and Texas, two of the 15 states filing price-fixing charges, settled with Hachette and HarperCollins in exchange for $52 million in restitution to customers.