US sues Apple for alleged publishing cartel

Apple’s reality distortion field is taking a battering after the US Justice Department has said that it ran a price fixing cartel with publishers on its ebooks.

Jobs’ Mob has insisted that it has not broken the law, which resulted in many of its loyal customers having to pay much more for e-books.

It insists that since Steve Jobs brokered the deal, it must be perfect, innovative and handy for users. He was a genius, of course, and would never exploit his customers in any way at all.

According to Reuters, already two publishers in Jobs’ cartel have panicked and settled to make the coppers go away, but it looks like Apple and a couple of its mates are preparing to copy Microsoft and try and slug it out in court.

It is not clear who has folded but the Justice Department is investigating alleged price-fixing by Apple, Simon & Schuster, HarperCollins, Hachette Book Group and Pearson and Macmillan.

Apple cut the deals two years ago when the consumer electronics maker launched its iPad tablet computer.

The publishers shifted to a model that allowed them to set the price of e-books and give Apple a 30 percent cut of sales. The move was designed to give Amazon a good kicking but meant that iPad users had to pay more for their books than anyone else.

The DoJ had been trying to eliminate Apple’s so-called “most favored nation” status, which had prevented the publishers from selling lower-priced e-books through rival retailers such as or Barnes & Noble.

However, Apple refused, presumably on religious grounds. It was one of the decisions that Jobs was proud of and even bragged about it.

Update: The US courts have now officially filed an antitrust lawsuit against Apple and its alleged e-book cartel. It was filed in the Manhattan federal court by the US Department of Justice Antitrust Division. 

In the filing, it claims Apple and associated publishers agreed on a price fixing scheme where rivals would not be able to compete, while ebook prices would increase. Apple, for its part, would get a 30 percent cut of the profits for each e-book. The named publishers in the lawsuit are: Simon & Schuster, HarperCollins, Hachette, Pearson PSO +1.57% PLC’s Penguin Group (USA) and Macmillan, a unit of Verlagsgruppe Georg von Holtzbrinck GmbH.

The Wall Street Journal  expects a settlement from some of the publishers to appear today. The US Attorney General, Eric Holder, is also expected to disclose information on a significant antitrust case later today. 

According to the lawsuit, “Defendants’ ongoing conspiracy and agreement have caused e-book consumers to pay tens of millions of dollars more for e-books than they otherwise would have paid”. Such is the price of reading on the iPad. 

It has been alleged that Apple conspired with major publishers to quash any sign of Amazon dominance in the market. The suit accuses the involved publishers of actively taking steps to conceal communications, and passing around instructions to remove any possible paper trails.