Support 100 years of independent journalism.

  1. Business
12 April 2012updated 22 Oct 2020 3:55pm

Much ado about Apple

Is the US Department of Justice making a fuss over nothing?

By Mark Nayler

The perilous future of publishers was highlighted yet again by yesterday’s news that the US Department of Justice is suing Apple, Macmillan and Penguin for conspiring to fix the price of e-books.

The fuss centres on the move these companies have made on the agency model of selling, (where the publishers set the price of the e-book and the retailers take a 30 per cent cut); retailers, unsurprisingly, favour a model where they buy the e-book from the publisher at wholesale price and sell it for however much they want.

Such a model, it’s said, increases healthy competition between retailers which in turn leads to variety and greater customer choice. And according to papers filed in New York’s Southern District Court on Wednesday morning, the collusion of these publishing giants with the world’s most valuable firm (the lawsuit was launched the day after Apple’s worth surpassed $600bn), is a deeply unfair attempt to crush the freedom – and therefore prosperity – of e-book retailers who, after all, need to carve out a living for themselves too.

But this moral and legal outrage needs to be tempered a little. Two things to bear in mind: first, where is this diversity and healthy retail competition that the agency model – which is not illegal, incidentally – supposedly threatens? In every direction you turn, Amazon lurks, offering consumers e-books and books at prices that most other retailers – including high street giants such as Waterstone’s – cannot compete with. Indeed, an adoption of the agency model for e-books is essentially a digital return to the net book agreement, which publishers relinquished in 1997. Waterstone’s, supermarkets and Amazon must have been rubbing their hands with glee when that happened, as the three of them they went on to dominate the market, squashing smaller outlets in the process. What variety!

Second, though the agency model is legal, price fixing obviously is not. No doubt there will be a fair amount of legal hair-splitting over what exactly the publishing CEOs have been up to, but at the moment the circumstantial evidence is pretty thin on the ground.

Sign up for The New Statesman’s newsletters Tick the boxes of the newsletters you would like to receive. Quick and essential guide to domestic and global politics from the New Statesman's politics team. The best of the New Statesman, delivered to your inbox every weekday morning. The New Statesman’s global affairs newsletter, every Monday and Friday. A handy, three-minute glance at the week ahead in companies, markets, regulation and investment, landing in your inbox every Monday morning. Our weekly culture newsletter – from books and art to pop culture and memes – sent every Friday. A weekly round-up of some of the best articles featured in the most recent issue of the New Statesman, sent each Saturday. A weekly dig into the New Statesman’s archive of over 100 years of stellar and influential journalism, sent each Wednesday. Sign up to receive information regarding NS events, subscription offers & product updates.
I consent to New Statesman Media Group collecting my details provided via this form in accordance with the Privacy Policy

The PDF document released by the DOJ reports that in late 2008, the Penguin Group and Macmillan CEOs, along with a few other heavyweights, had dinner together and ‘business matters’ were discussed. You’re kidding, right? They were at it again in January 2009, this time discussing the future of e-books and Amazon’s role in that future.

With their future looking increasingly treacherous, it’s no wonder publishing bosses have a lot to talk about at the moment. The agency model might be their only chance to survive in the cut throat world of e-book and book sales

Mark Nayler is a senior researcher at Spear’s magazine.