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In a move widely anticipated, the United States Justice Department today filed an antitrust lawsuit against Apple and some of the largest book publishers over allegations that they colluded to raise ebook prices.
The publishers named in the lawsuit are Simon & Schuster, Hachette, HarperCollins, Penguin and Macmillan.
According to Bloomberg, Simon & Schuster, Hachette and HarperCollins are settling the lawsuit, while sources indicate that Penguin and Macmillan are prepared to fight the Justice Department. Apple, which saw its market capitalization hit $600bn yesterday, has refused to engage in settlement talks and is also expected to fight the charges.
As Bloomberg explains, at the heart of the controversy is how book publishers sell their wares. Apple has employed the agency model, which lets book publishers set prices for their books, or in this case, ebooks.
As part of this, it included "most-favored nation clauses" in its agreements with publishers, which required the publishers to provide Apple with the lowest prices offered to Apple's competitors.
While the lawsuit doesn't seek to forbid the agency model -- it's specifically targeting alleged collusion around pricing between Apple and publishers -- the government apparently prefers the wholesale model, where retailers set the price of books, and if the Justice Department gets its way, it could have a dramatic impact on the development of the ebook market.
That market is booming. As we reported last week, a new Pew Internet & American Life Project report shows that 21% of adults in the United States have read an ebook in the past year, and thanks to the rapid adoption of e-readers and tablets, that number is set to grow considerably. That means the stakes couldn't be higher as the Justice Department looks to have a say in how ebooks are being priced.