- Associated Press - Wednesday, April 11, 2012

WASHINGTON (AP) - The Justice Department and several states have sued Apple Inc. and major book publishers, alleging a conspiracy to raise the price of electronic books that Attorney General Eric Holder says cost consumers millions of dollars.

The government also has reached a settlement with three publishers, Hachette, HarperCollins and Simon & Shuster. But it will proceed with its lawsuit in federal court in New York City against Apple and Holtzbrinck Publishers, doing business as Macmillan, and The Penguin Publishing Co. Ltd., doing business as Penguin Group.

Holder told Justice Department news conference on Wednesday that “we believe that consumers paid millions of dollars more for some of the most popular titles” as a result of the alleged conspiracy. Justice’s antitrust chief Sharon Pozen said the scheme added $2 to $3 to the prices of individual books.

Connecticut Attorney General George Jepsen said the total cost to consumers was more than $100 million.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.

The U.S. government filed an antitrust lawsuit against Apple Inc. and book publishers Wednesday, saying the publishers conspired with Apple to raise retail electronic-book prices to limit competition.

The government also filed papers in U.S. District Court in Manhattan saying it had reached a settlement with publishers Hachette, HarperCollins and Simon & Schuster. It will proceed with its lawsuit against Apple and other publishers, including Holtzbrinck Publishers, doing business as Macmillan, and The Penguin Publishing Co. Ltd., doing business as Penguin Group.

The lawsuit said the effort was a response to the success Amazon.com had in selling e-books for just under $10. The alleged conspiracy came as Apple was preparing to launch the iPad and called for Apple to be guaranteed a 30 percent commission on each e-book it sold, the lawsuit said.

“To effectuate their conspiracy, the publisher defendants teamed up with defendant Apple, which shared the same goal of restraining retail price competition in the sale of e-books,” the lawsuit said.

Apple did not immediately respond to a comment request.

Macmillan Chief Executive Officer John Sargent said in a letter to authors, illustrators and agents that the company has not settled because it is “hard to settle a lawsuit when you know you have done no wrong.”

He said: “Macmillan did not act illegally. Macmillan did not collude.”

Sargent said the filing of the lawsuit came after discussions with the Department of Justice that lasted months.

“But the terms the DOJ demanded were too onerous. After careful consideration, we came to the conclusion that the terms could have allowed Amazon to recover the monopoly position it had been building before our switch to the agency model,” he said. “We also felt the settlement the DOJ wanted to impose would have a very negative and long term impact on those who sell books for a living, from the largest chain stores to the smallest independents.”

At the heart of the e-book pricing debate is the industry’s ongoing concerns about Amazon. Publishers see the “agency model” as their best, short-term hope against preventing the online retailer from dominating the e-book market and driving down the price of books to a level unsustainable for publishers and booksellers.

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