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Apple and publishers facing Department of Justice lawsuit

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The U.S. Justice Department served Apple Inc. and five leading publishers with an antitrust lawsuit, charging that the publishing companies worked with Apple to artificially raise e-book prices. The investigation suggests that publishers agreed to increase e-book prices to match Apple’s iBookstore, which prices e-books between $12.99 and $14.99.

Of the publishers sued, Hachette Book Group, Simon & Schuster and HarperCollins have agreed to a settlement that required them to end e-book contracts with Apple and any other retailer with a “most favored nation” clause, which states that no other retailer can sell e-books for lower prices. The other two publishers sued were Macmillan and Penguin Group USA.

Erin Crum, vice president of corporate communications for HarperCollins, released a statement saying the company did not violate any antitrust laws and plans to comply with its obligations under the agreement.

Amazon, one of Apple’s rivals in some markets, has long held control over the e-book market. With the introduction of the iPad, former Apple chief executive officer Steve Jobs hoped to shift control in Apple’s favor.

Since 2010, Amazon’s hold on the e-book market has decreased to 60 percent, 30 percent less than previous years.

Amazon, which sells e-books for $9.99, used its low prices to attract readers to its own e-reading device franchise, the Kindle.

“I chose the Kindle Fire because I was able to use books I had to trade in for the e-reader,” said Jody Erickson, a graduate student at the University of Wisconsin-Milwaukee. “For about $199, I am able to do all of things that I want to do for a fraction of the cost of an iPad.”

“I have been able to buy many new releases for under $10 and books for my boys to read for as little as 99 cents,” Erickson added.

This lawsuit could result in lower e-book prices for consumers and less competition between e-book retailers.

The Department of Justice’s lawsuit also brings great news for Amazon, which plans to continue lowering e-book prices. But Erickson said the investigation and lawsuit might not bring all good change.

“Authors should be compensated for their work, so I’m hoping this doesn’t bottom out prices, for their sake,” Erickson said.

In an open letter, Scott Turow, president of the Authors Guild, said the Department of Justice was “on the verge of killing real competition in order to save the appearance of competition.”

Apple and the publishers are also dealing with a similar lawsuit with the European Commission.

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