What went up must come down.
You may feel free to consider this an obituary for the so-called “agency model” price-fixing scheme that has cost the citizens of Kindle Nation millions of dollars over the past two years.
As we have been predicting since the launch of the agency model in the Spring of 2010, the U.S. Justice Department filed suit today, in a New York federal court, accusing Apple and five of the Big Six publishers of conspiring to fix ebook prices.
Three of the publishers — News Corp’s HarperCollins Publishers Inc, CBS Corp’s Simon & Schuster Inc and Lagardere SCA’s Hachette Book Group — agreed to a settlement aimed at restoring the lower ebook prices, usually $9.99 and below for new releases, that were in place from the launch of the Kindle in November 2007 until the agency-model scheme took effect as the iPad was launched on April Fool’s Day 2010.
Two of these three, Hachette and HarperCollins, also settled with several U.S. states, agreeing to pay $51 million in restitution to consumers who bought e-books at the higher prices. Kindle Nation Daily will provide information soon on the steps involved for customers who believe they may be eligible for such payments.
“This is a big win for Kindle owners, and we look forward to being allowed to lower prices on more Kindle books,” Amazon spokesman Drew Herdener told Kindle Nation Daily this afternoon.
The settlement will allow Amazon to resume discounting books, will terminate the publishers’ “most favored nation” contracts with Apple, and will set a two-year moratorium on any publisher moves to prevent retailers from offering discounts on ebooks.
U.S. Attorney General Eric Holder appeared at a news conference in Washington todays and charged that executives at the highest levels of Apple and the publishers had worked together to eliminate competition among sellers of e-books.
“As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles,” Holder said.
Reuters reported this afternoon that three of the six defendants — Apple and publishers Penguin and Macmillan — plan to fight the Justice Department lawsuit, but the Justice Department said it will vigorously pursue the suit against Apple and the two publishers that did not settle. The lawsuit was filed in the U.S. District Court for the Southern District of New York.
Court documents filed by the Justice Department feature “smoking-gun” evidence that late Apple CEO Steven Jobs was at the heart of the conspiracy, with tidbits such as this:
To persuade one of the Publisher Defendants to stay with the others and sign an agreement, Apple CEO Steve Jobs wrote to an executive of the Publisher Defendant’s corporate parent that the publisher had only two choices apart from signing the Apple Agency Agreement:(i) accept the status quo (“Keep going with Amazon at $9.99″); or (ii) continue with a losing policy of delaying the release of electronic versions of new titles (“Hold back your books from Amazon”). According to Jobs, the Apple deal offered the Publisher Defendants a superior alternative path to the higher retail e-book prices they sought: “Throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99.”