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Feds jump on Apple-ebook price-fixing probe bandwagon

Department of Justice confirms that it, like the EU, is investigating possible antitrust violations

December 8, 2011 12:11 PM ET

Computerworld - The top antitrust official at the U.S. Department of Justice (DOJ) on Wednesday confirmed that the agency is investigating possible price-fixing in the electronic book industry.

During a congressional hearing, Sharis Pozen, the DOJ's acting antitrust chief, said her team was investigating ebook industry practices.

Although publications including the Wall Street Journal had previously reported that Justice was looking into ebooks for possible violations of antitrust law, Pozen's comments were the first official confirmation.

"We are also investigating the electronic book industry, along with the European Commission and the states' attorneys general," Pozen said during remarks before a House Judiciary subcommittee that deals with intellectual property and competition issues.

According to the Wall Street Journal and book industry websites, the attorneys general of both Texas and Connecticut are also investigating a possible cartel among ebook publishers and Apple.

On Tuesday, the European Commission, the EU's antitrust watchdog, announced it had opened a price-fixing probe of Apple and five major publishers, including France's Hachette Livre, German-owned Macmillan, U.K. publisher Penguin, and U.S.-based Harper Collins and Simon & Schuster.

Apple is involved because of its alleged deals with the publishers to boost prices of ebooks sold through its iBooks app for the iPhone, iPad and iPod Touch.

Pozen did not elaborate on the DOJ's investigation, and did not name Apple as a target or mention publishers by name.

The European Commission will investigate prices set on the "agency" model, where Apple takes its usual 30% App Store cut of all revenues.

The book publishing business has traditionally used a different business model under which publishers sell books to retailers at a wholesale price. The retailers then set prices to consumers.

A class-action lawsuit filed last August in a California federal court claimed that Apple and ebook publishers instituted the agency model, and raised prices, because the publishers were concerned about Amazon.com's discounts, which sold most ebooks at $9.99.

The Seattle law firm of Hagens Berman filed the lawsuit, which argued Apple was also involved.

"We believe that Apple feared Amazon's low prices, and worked with the publishers to cook up a plan that would not only force Amazon to raise its prices, but also help publishers to regain some of the power they had lost since the advent of electronic publishing," Hagens Berman founding partner Steve Berman said in a blog post three months ago.

Apple has not replied to earlier requests for comment on antitrust actions that target it and electronic book publishers.

covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at Twitter @gkeizer, on Google+ or subscribe to Gregg's RSS feed Keizer RSS. His e-mail address is gkeizer@computerworld.com.

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