The sequence of events under which both Apple and Amazon ended up selling e-books under an “agency” model, where publishers set the price and the e-retailers take a cut, is under investigation by the U.S. Department of Justice, by state attorneys general in Texas and Connecticut, and by the European Union, according to the Wall Street Journal.
Prior to the launch of Apple’s iPad in early 2010, Amazon had been buying e-books on a wholesale model and setting its own retail prices, which on some titles were below its cost. Apple offered publishers the ability to sell on an agency model, and after a major smackdown, Amazon capitulated and began buying e-books on an agency model as well (see “Macmillan and Amazon Back in Business”). Publishers preferred the agency model because it gave them more control over pricing and kept prices higher, which they wanted to do in order to protect their print book business.
The Justice Department confirmed that it was investigating the e-book business for the first time during a congressional hearing this week. The European Union also announced its investigation this week. It named Apple, and five publishers: Hachette, HarperCollins, Simon & Schuster, Penguin, and Holzbrinck.
In addition to the multiple investigations, a class action suit alleging that Apple helped arrange an industry-wide price increase was filed in federal court in California in August.
Pricing of digital products is still a volatile issue in the comics biz. Amazon appears to be buying the 100 graphic novels that DC is offering exclusively through the online behemoth on a wholesale model and aggressively pricing them at less than print prices (see “Kindle Launches Graphic Novel Price War”), which led Barnes & Noble and Books A Million to return the titles from their physical storefronts. And just this week, the rumor that Dark Horse was going to be pricing its digital comics at substantially below print on release led some comic retailers to pledge to reduce their support for the publisher’s titles (see “Dark Horse Stanches Day and Date Twitterstorm”).
The investigations and litigation surrounding e-book pricing portend a continued unsettled environment in how books, and by extension graphic novels, are priced in digital form.