The U.S. Department of Justice and 15 states -- including Tennessee -- charged Apple Inc. and five major book publishers of conspiracy last week in what they alleged is a scheme to inflate the price of electronic, or digital, books. The alleged price-fixing, Tennessee Attorney General Bob Cooper said, has cost U.S. consumers more than $100 million since the scheme allegedly took affect in 2010. Given that and the soaring popularity of the e-books, the combined Justice Department/state case to end such activity has merit.
Some of the alleged conspirators obviously believe so. Three of the publishers charged already have settled, though restitution still must be determined. At this writing, neither Apple nor the remaining named publishers have done so. The antitrust case against them will proceed. The federal and state government should prosecute it vigorously. That's the best way to keep the lucrative e-book market competitive.
The governments' case alleges that Apple and the publishers conspired to create a price-fixing plan that inflated the cost of e-books by requiring retailers to sell electronic titles at prices set by the publishers, rather than a price determined by retailers and the marketplace. The money involved in a market that is growing exponentially -- e-book sales expanded by 117 percent in 2011 -- is considerable.
Prior to the start of the alleged conspiracy, some retailers -- most notably Amazon -- sold many e-books for $9.99. Afterwards, the price for many of the same titles rose to $12.99 and $14.99, with Apple allegedly getting a 30 percent cut. The government's announcement of the antitrust case already has prompted one favorable outcome for consumers.
Amazon promptly announced that it would to reduce e-book prices. Other sellers likely will follow suit.
Many booksellers took a dim view of the governments' action, but that is self-serving and misguided. Their inflated profits should not come from what is tantamount to a publishers' monopoly. The marketplace, not a group of alleged conspirators, should determine the price consumers pay for an e-book or any other commodity. Federal courts have long held that fixing prices is illegal. The federal suit against Apple and others is a powerful and welcome reminder of that precedent.