The Kindle Swindle: Eric Holder Sues Apple, E-Book Publishers

Careful, booklovers. You may have paid too much, according to the Department of Justice.

E-books are comparatively new to the realm of bibliophiles, and the jury is still out on whether or not they will survive or surpass the wonderfully connective experience and tactility of holding a traditional ink-on-paper volume–being able to write notes in margins, seeing and feeling the physical progress of your reading by estimating the pages read versus the pages remaining, following excitedly with your finger along the muted lines of simple arnement, the joyous cacophony of a page whishtly turning to the next (so maybe I’m biased…).

Regardless, though, perhaps it has officially arrived. The decision of the Department of Justice to sue Apple, Simon & Schuster, HarperCollins, and other publishers for conspiring to set prices on reading material can be seen as an indication of its permanence. It is, after all, an adage of governments that there shall be in the marketplace no representation without regulation.

Allegedly, these publishers (and Apple, the e-book seller) colluded to fix a price on their products. If this is true, then perhaps they did break existing law; but anyone who has read me before knows that my points do not necessarily rest on existing premises of politics.

Eric Holder, our illustrious general attorney, noted, “as a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles.”

More than … ?

Paper books?

Seriously. “More” than what? More than what is fair?

If people bought these books, it sounds like a fair price to me. (This statement assumes no one was being forced upon penalty of pain or death to buy an e-book.)

Sharon Pozin of the Department of Justice’s antitrust division claimed that these publishing companies were also trying to get Kindle readers to pay more as well, in some cases raising the price beyond $9.99, which, according to the AP, “was substantially below [the publisher’s] hardcover prices.” Sounds like e-readers were still getting a good deal (even if they’d have nothing to show for their purchase in the event of a global EMP…) compared to traditional books. So what’s the problem?

While HarperCollins and Simon & Schuster have settled with the United States, Macmillan and Penguin refuse to (as does Apple)… So far .

Macmillan has shown courage by telling its authors and retailers, “it is hard to settle a lawsuit when you know you have done no wrong.” They deny any collusion.

And that might be the case, exactly. Amazon has long been suspected of undercharging its customers for e-books, compared to the actual cost of production, which has angered many publishing companies. Apple, on the other hand, may simply be offering a product at a price that is compatible with publishing costs and desired profit. (Regardless, it is still the customer that makes the final purchase decision.)

Amazon is a leader in the e-book retail industry–and they know it. Good for them. But in becoming such a leader, they have been able to demand discounts from publishers, that they (the publishers) would otherwise be unwilling to offer. In some cases, Amazon refused to continue selling e-books of companies who would not agree to Amazon’s terms. Apple, I have to assume, offered an attractive alternative. And the market rolled on.

Until the Department of Justice, perhaps based largely on Amazon’s low-price offerings, decided that customers were paying too much.

In other words, the United States has accused Apple and these publishers of fixing prices, while telling them they must fix their prices.

One really has to wonder what Amazon’s role is in all this. Since 2008, they have increased their lobbying expenditures by 60%. Their PAC has donated nearly 30% more to Democrats over the last four years (but has recently begun betting on more Republicans). They have more competition in the e-book market than ever before. Will Apple’s loss be Amazon’s gain?

It appears so. This “scheme” supposedly began at the beginning of 2010, right around the time the iPad was launched. Since then, as the AP eruditely notes, “publishers believes [sic] the new price model has reduced Amazon’s market share from around 90 percent to around 60 percent.” Apple’s gain has in these two years been Amazon’s loss, and Macmillan thinks this suit would reverse that market force.

“The terms the DOJ demanded were too onerous,” said John Sargent, CEO of Macmillan. “After careful consideration, we came to the conclusion that the terms could have allowed Amazon to recover the monopoly position it had been building before our switch to the agency model. We also felt the settlement the DOJ wanted to impose would have a very negative and long term impact on those who sell books for a living, from the largest chain stores to the smallest independents.”

Don’t get me wrong, I don’t begrudge Amazon for their success in this market, but perhaps the Department of Justice has in regulating the fairness of some companies made Amazon just a little more fair.

But take heart, consumers. Eric Holder has ordered the settling publishers to return $52 million in overcharges to the consumers, who likely didn’t even REALIZE they were being Swindled. I don’t know about you, but I am holding my breath waiting for the check…

The AP contributed, as it were, to this story.