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Senator says Apple e-book suit has 'empowered monopolists'

In an op-ed piece, Sen. Charles Schumer defends Apple in the e-book price-fixing lawsuit brought by the Department of Justice and says the suit could boost an Amazon e-book monopoly.


New York Sen. Charles Schumer reprimanded the Department of Justice today for filing its e-book antitrust lawsuit against Apple. Using strong language in a Wall Street Journal Op-Ed, he wrote that "the suit could wipe out the publishing industry as we know it."

The Department of Justice brought the lawsuit against Apple in April alleging that the tech giant and a group of book publishers colluded to illegally fix e-book prices to boost profits and force e-book rival Amazon to abandon its discount pricing.

The suit also alleges that Apple and the publishers pushed an "agency model" in which publishers set their own e-book prices, rather than the traditional wholesale model in which publishers set a retail price and retailers then set their own sales price.

In his op-ed, Schumer doesn't seem convinced that the traditional wholesale is necessarily good for publishers, authors, and consumers -- saying that it makes the publishing world less diverse.

"The suit will restore Amazon to the dominant position atop the e-books market it occupied for years before competition arrived in the form of Apple," he wrote. "If that happens, consumers will be forced to accept whatever prices Amazon sets."

He went on to write, "This model may have served Amazon well, but it put publishers and authors at a distinct disadvantage as they continued to try to market paper books and pave a way forward for a digital future. Without viable retail competitors, publishers were forced to make a Hobson's choice. They could allow their books to be sold at the prices Amazon set, thus undercutting their own current hardcopy sales and the future pricing expectations for digital books--or stay out of the e-books market entirely. In an increasingly digital age, the latter was simply not an option."

Schumer argued that the "agency model," allegedly employed by Apple, is a superior model because it increases competition. It would also give consumers several platforms to buy e-books, he said, and force Amazon to conform.

Of the five publishers accused of participating, three have settled: Hachette Book Group, HarperCollins Publishers, and Simon & Schuster (owned by CBS, which publishes CNET). The two publishers who refused to settle and deny the allegations are Macmillan Publishers and Penguin Group. Ever since the Department of Justice filed the suit, Apple has denied any wrongdoing.

"If publishers, authors and consumers are at the mercy of a single retailer that controls 90% of the market and can set rock-bottom prices, we will all suffer," Schumer wrote. "I am concerned that the mere filing of this lawsuit has empowered monopolists and hurt innovators."

If the lawsuit doesn't settle, the trial is scheduled to happen in 2013.