Inside US lawsuit: How Apple, publishers allegedly brought Amazon to heel

US antitrust lawyers filed a lawsuit against Apple Inc. and two publishers, alleging they conspired to inflate the price of e-books, at an estimated cost to readers of $100 million.

Antitrust lawyers at the Department of Justice filed a civil lawsuit Wednesday charging Apple Inc., and two of the nation?s largest book publishers with conspiring to artificially inflate the price of e-books.

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The antitrust suit was filed in federal court in New York, where three other publishers agreed to settle the same charges.

In an alleged plot that could easily rival best-selling tales published by the defendant companies, prosecutors say the five book publishers conspired over a four-year period with Apple in an attempt to force online retail giant Amazon to stop charging a deeply discounted $9.99 for new e-books.

Estimates are that the alleged plot cost readers $100 million in inflated e-book prices.

?During regular, near-quarterly meetings, we allege that publishing company executives discussed confidential business and competitive matters ? including Amazon?s e-book retailing practices ? as part of a conspiracy to raise, fix, and stabilize retail prices,? Attorney General Eric Holder told reporters in Washington.

?With today?s lawsuit, we are sending a clear message that competitors, even in rapidly evolving technology industries, cannot conspire to raise prices,? added Sharis Pozen, acting assistant attorney general in charge of the Justice Department?s antitrust division.

?We want to undo the harm caused by the companies? anticompetitive conduct and restore retail price competition so that consumers can pay lower prices for their e-books,? she said.

The lawsuit is the result of cooperation between the Justice Department?s Antitrust Division and the European Commission. The attorneys general of Connecticut, Texas, and 13 other states also played a role in the investigation.

In addition to Apple, the publishers named in the pending suit are Macmillan and Penguin Group, both based in New York City.

Hachette Book Group, HarperCollins, and Simon & Schuster, all New York-based, have agreed to settle the lawsuit and end anticompetitive practices alleged by the government.

The alleged conspiracy revolved around the emerging market for e-books and a perceived threat to the future of the book publishing business as it presently exists.

Publishing executives were worried that Amazon?s deep-discount pricing of e-books might significantly undercut their ability to continue to sell hardcover books for $25 or more.

In addition, they worried that if e-books became too popular, upstart digital publishers ? including Amazon itself ? might enter the e-book industry and push the long-dominant publishers aside, according to court documents.

?Amazon?s move threatened the publisher defendants? traditional positions as the gate-keepers of the publishing world,? the suit says.

To rein Amazon in, the suit says, executives from the five book publishers decided to change the way they sold their books to book retailers.

Under the old rules, retailers purchased the books at a wholesale discount off the publisher?s list price. The retailers were then free to set their own bookstore prices after that.

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