The U.S. Department of Justice (DOJ) filed an antitrust suit Wednesday against computer giant Apple and five major publishers to allow greater competition on e-book prices.

A settlement was reached with three publishers named in the suit—Hachette Book Group USA, HarperCollins Publishers and Simon & Schuster—but the DOJ will continue to litigate against Penguin Group (USA) and Holtzbrinck Publishers, which does business as Macmillan. Sixteen states filed a similar suit as well, with Hachette and HarperCollins agreeing to a settlement.

The DOJ alleges that company executives collaborated to eliminate competition among stores selling e-books, which ultimately resulted in consumers paying millions of dollars more for e-books. Along with conspiring to raise prices, the suit alleges “that these publishers agreed to impose a new model which would enable them to seize pricing authority from bookstores; that they entered into agreements to pay Apple a 30% commission on books sold through its iBookstore; and that they promised—through contracts including most-favored-nation provisions—that no other e-book retailer would set a lower price.”

The settlement with Hachette, HarperCollins and Simon & Schuster, which must be approved by the court, would require them to grant retailers the freedom to reduce the prices of their e-book titles and requires that they end their “anticompetitive, most-favored-nation agreements with Apple and other e-books retailers,” said Attorney General Eric Holder at a press conference yesterday.  

The companies also will be prohibited for two years from placing constraints on retailers’ ability to offer discounts, prohibited from conspiring or sharing competitively sensitive information with their competitors for five years and must implement a strong antitrust compliance program.

According to the DOJ, Apple executives allegedly worked on the new pricing model with publishers in late 2009 and early 2010, nearing the launch of its iPad. The suit describes the shift from the "wholesale" model, with retailers setting the price for their books, to an "agency" model under which publishers set the price and retailers earn a commission.

In a letter to Macmillan authors, illustrators and agents, CEO John Sargent said the company “Macmillan did not act illegally. Macmillan did not collude.”

Hachette, which publishes Christian books under its FaithWords and Jericho Books imprints, responded in a statement by saying the company had “reluctantly agreed to join the settlement,” but that it “was not involved in a conspiracy to illegally fix the price of eBooks.”

Penguin also denied wrongdoing, according to a statement from CEO John Makinson: “We have done nothing wrong. The decisions that we took, many of them costly and difficult, were taken by Penguin alone.”

HarperCollins—the parent company of Zondervan and which has entered into an agreement to acquire Thomas Nelson—responded in a press release as follows: “HarperCollins did not violate any anti-trust laws and will comply with its obligations under the agreement.” 

Neither Simon & Schuster, which publishes Christian titles under Howard Books, nor Apple has issued a statement.

Amazon released a statement on the three publishers’ settlement: “This is a big win for Kindle owners, and we look forward to being allowed to lower prices on more Kindle books.”

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