The United States Department of Justice has filed a lawsuit against Apple and several book publishers for fixing the price of e-books.  The lawsuit filed in New York district court sues publishers Hachette SA, HarperCollins, Macmillan, Penguin and Simon & Schuster for colluding with Apple to raise the prices of e-books.

The core of the issue comes down to the ‘Agency Model’ employed by apple with rules set for being in the Apple Book Store. Apple, Penguin and Macmillan want to protect the so-called agency model that lets publishers — not vendors — set e-book prices.

Before Apple got into the e-book game, Amazon was selling e-books for cheap around $10. Amazon figured cheap e-books would entice consumers to buy a Kindle and publishers weren’t too happy because this made it harder to sell hardbakcs.  Apple changed the game with the iPad and to get books on the iPad, publishers had to follow a new rule where the publishers could set their own book price but no other online e-book store could sell it for less. This means that if Amazon wanted to sell the books, they couldn’t discount it to stay competitive.

The e-book market is expected to reach $1 billion in 2012 so it will be interesting to see the outcome of this lawsuit by the DoJ.

Source: Bloomberg