Apple expected to modify its eBook cartel

Apple is expected to pull apart its price fixing cartel on ebooks which meant that users paid a lot more money for their goods.

According to Reutersthe Justice Department will reach a settlement in the next few weeks with Apple and some of the major publishers.

The negotiations are still fluid, which means that they are being sorted out in the local wine bar, but the idea is to kill off Apple’s so-called “most favoured nation” status, which had prevented the publishers from selling lower-priced e-books through rival retailers such as or Barnes & Noble.

A move to a “wholesale model” would help consumers but also Amazon, which had been the leading bargain e-book retailer with the Kindle.

The Justice Department wants to end agreements Steve Jobs squeezed from five publishers about two years ago. Simon & Schuster, Lagardere, Hachette Book Group, Pearson, Penguin Macmillan and HarperCollins were all involved in the deal.

This involved an agreement with Apple where the publishers shifted to an “agency model” that allowed them to set the price of e-books and give Apple a 30 percent cut.

Amazon had operated on the wholesale model, in which publishers sold books to retailers, who could set whatever price they wanted.

The publishers worried readers might get used to cheaper books and that Amazon would gain more market power – meaning even cheaper prices.

The Apple deal meant publishers could not allow rival retailers such as Amazon to sell the same e-books at lower prices.

It has been estimated that a switch back to the wholesale model could increase Amazon’s revenues by about $1.1 billion this year and $1.6 billion in 2013.