WASHINGTON — The Justice Department and 15 states sued Apple Inc. and major book publishers Wednesday, alleging a conspiracy to raise the price of electronic books they said cost consumers more than $100 million in the past two years by adding $2 to $5 to the price of each e-book.
Attorney General Eric Holder said executives at the highest levels of the companies conspired to eliminate competition among e-book sellers. Justice's antitrust chief Sharis Pozen said the executives were desperate to get Amazon.com, marketer of the Kindle e-book reader, to raise the $9.99 price point it had set for the most popular titles, which was substantially below their hardcover prices.
The federal government reached a settlement with three of the publishers, Hachette, HarperCollins and Simon & Schuster. But it will proceed with its lawsuit in federal court in New York City against Apple and Holtzbrinck Publishers, doing business as Macmillan, and the Penguin Publishing Co. Ltd., doing business as Penguin Group.
Connecticut and Texas, two of the 15 states filing a separate complaint, reached agreements with Hachette and HarperCollins to provide $52 million in restitution to consumers, using a formula based on the number of states participating and the number of e-books sold in each state. Other states in the case — Florida is not involved — may sign onto the agreement.
Holder told a Justice Department news conference Wednesday that "we believe that consumers paid millions of dollars more for some of the most popular titles" as a result of the alleged conspiracy. Pozen said the scheme added an average of $2 to $3 to the prices of individual books.
Connecticut Attorney General George Jepsen said the individual book markups went as high as $5 and the total cost to consumers was more than $100 million since April 2010, when the scheme allegedly took effect.
According to Pozen, Apple's Steve Jobs told publishers involved in the alleged conspiracy that "the customer pays a little more, but that's what you want anyway."
The lawsuit said the effort to get e-book prices reduced by Amazon.com came as Apple was preparing to launch the iPad. The government said the conspirators agreed that instead of selling books to retailers and letting them decide what retail price to charge, the publishers would convert the retailers into "agents" who could sell their books but not alter the publisher-set retail price. The scheme called for Apple to be guaranteed a 30 percent commission on each e-book it sold, the lawsuit said.
"To effectuate their conspiracy, the publisher defendants teamed up with defendant Apple, which shared the same goal of restraining retail price competition in the sale of e-books," the lawsuit said.
At the heart of the e-book pricing debate is the industry's ongoing concerns about Amazon. Publishers see the "agency model" as their best, short-term hope against preventing the online retailer from dominating the e-book market and driving down the price of books to a level unsustainable for publishers and booksellers.