After some months of investigation, the US department of justice has warned Apple and five major US publishers that they face legal action over ebook pricing.
This legal threat hasn't been made public: 'people familiar with the matter' have reported the talks to the Wall Street Journal after the five publishers and Apple were accused of working together to raise the price of ebooks.
Penguin, HarperCollins, Simon & Schuster, Hachette and Macmillan are the accused publishers, of which 'several' are apparently holding talks to try and avoid a court case.
Call my agency model
It's all down to the 'agency' model of ebook pricing that Apple introduced with the iPad. This method of pricing sees publishers set a price for each ebook; of this price, Apple takes a 30 per cent cut for selling it through iBookstore and rival retailers, including Google Books and Amazon's Kindle Store, aren't allowed to sell it at anything less than the Apple price.
This means you won't be able to get an ebook for less than Apple charges, but the Apple price allows for the 30 per cent cut that the manufacturer takes for selling the ebook. Thus the prices are pushed up across the industry.
The US Department of Justice reckons this violates antitrust laws relating to competition in the ebook market, with grounds enough to sue – or at least so say the anonymous sources familiar with the matter.
Some of the publishers are investigating alternatives to avoid the possibility of a trip to court, with one mooted idea being to keep the agency model described above, but allow other booksellers to offer some discounts.
It's not just the US that's worried about ebook pricing: the Office of Fair Trading in the UK is also looking into the pricing issue, as is the EU.
Article continues below