A proposed settlement of the government's lawsuit against several book publishers for alleged price fixing would result in "higher overall average e-book and hardback prices and less choice, both in how to obtain books and in what books are available," according to a letter written by Barnes & Noble to the Justice Department.
In an April lawsuit, the government alleged that five publishers and Apple conspired to adopt a new pricing structure for e-books. Apple and the publishers agreed on an "agency" model where it would receive a 30 percent cut of each sale.
In traditional book retailing, retailers set the prices on books after purchasing them from publishers.
All parties named in the suit dispute the collusion charges. Publishers argue that they now receive less money per title than under the traditional model. The agency model, they argue, now allows retailers to sell e-books at a profit versus the traditional model where discounts come out of merchants' pockets.
In its letter to the Justice Department, Barnes & Noble claims the agency model has helped to level the playing field. The company, which has a 27 percent share of the e-book market, claims that before agency pricing, Amazon.com held a 90 percent share of the market. Since then, it has seen Amazon's number drop to around 60 percent.
Before going the agency pricing route, Barnes & Noble claimed it was "losing substantial money in an effort to compete with Amazon's pricing and was unable to gain significant market share." It also asserted that "other potential e-book distributors declined to enter the industry."
In essence, as a blog by Rick Newman on the U.S. News & World report site points out, Barnes & Noble is arguing in its letter that the real issue in the e-book market is not that prices are being maintained at a high level through collusion, but that Amazon's pricing is predatory and, left unchecked, will result in the demise of many e-book sellers. In that scenario, consumers will be at the greatest risk since Amazon will no longer have any competitors and therefore will be able to set any price it wants on titles.
The Justice Department, according to a Wall Street Journal article, maintains the proposed settlement "will begin to undo the harm caused by the companies' anticompetitive conduct, and will restore price competition so that consumers can pay lower prices for their e-books."
Hachette Book Group, HarperCollins Publishers and Simon & Schuster have all agreed to settle with the Justice Department. Apple, Macmillan and Penguin Group have not reached a deal.
The settlement agreement includes the parties terminating their agreements with Apple and prevents them from entering into other agency agreements "that constrain retailers' ability to offer discounts or other promotions to consumers to encourage the sale of the publishers' e-books" for two years. The publishers also agreed to not share "competitively sensitive information with their competitors" for a period of five years.
- Barnes & Noble's Letter to the Justice Deparment - Barnes & Noble/The Wall Street Journal
- Justice Department Reaches Settlement with Three of the Largest Book Publishers and Continues to Litigate Against Apple Inc. and Two Other Publishers to Restore Price Competition and Reduce E-book Prices - The United States Department of Justice
- Barnes & Noble Objects to E-Book Settlement - The Wall Street Journal
- Barnes & Noble says e-books settlement hurts public - Reuters
- Barnes & Noble's Convoluted Defense of Pricey Books - U.S. News & World Report