Apple’s refusal to enter an agreement with the US Department of Justice (DOJ) that forbids it from signing a deal that “restricts, limits or impedes the ebook retailer’s ability to set, alter or reduce the retail price of any ebook,” is likely to be an attempt to save its iBookstore from being diminished.
The DOJ ruling would stop Apple from being able to deal with publishers using an agency model that allows publishers to set their own prices. In contrast Amazon uses a wholesale pricing scheme, selling their ebooks below cost. As a result of Amazon’s strategy, publishers are struggling to charge the full price for printed books.
It is thought that Apple’s lawyers may make a case that the agency model actually increases competition, allowing ebook rivals to take back some of the 90 per cent market share Amazon had amassed.
The US Department of Justice sued Apple and five major book publishers, accusing them of colluding to raise ebook prices. Three publishers have reportedly accepted the DOJ settlement, while Apple and two publishers – MacMillan and Penguin – have refused to negotiate.
The settlement, according to the Wall Street Journal, would tear up the contracts publishers have already signed with Apple, scrap the most-favoured nation clause that stopped them selling books more cheaply to Amazon or elsewhere and impose a “cooling-off period” before they could sign another deal.
The DOJ believes that the waiting period would allow publishers and booksellers to resume a one-to-one relationship, “free of the taint of collusion.” However, it is the length of that cooling-off period that Apple takes issue with. The Journal suggests that such a cooling-off period could give Amazon time to sell ebooks at a lower price. A lower price-point, plus the additional 30 per cent surcharge due to Apple, would make the iBookstore less attractive to publishers.
The US Justice department and the European Commission have been investigating Apple and a number of book publishers who are suspected of pushing up ebook prices.