Justice Department Sues Apple, Hachette Over E-book Pricing

The U.S. Justice Department sued Apple Inc. (Nasdaq: AAPL) and French publisher Hachette, owner of Macmillan, on Wednesday for allegedly fixing the price of e-books.

Three other publishers -- Simon & Schuster Inc, Hachette Book Group and HarperCollins Publishers Inc -- are working to avoid the legal battle and may reach a settlement by Wednesday. Bloomberg also reports that the Penguin Group is preparing to fight the US Justice Department in the court, if needed.

Representatives of Apple and the five publishers have declined to comment to the media regarding the report. Apple and Macmillan have denied that they acted jointly to raise prices.

Apple shares, though, rose $4.96 to $633.40.

Apple faces allegations that the company persuaded publishers to change how they priced their e-books before the introduction of the iPad in April 2010.

The Wall Street Journal had reported in March there were allegations that under an agency model, several of the book publishers set e-book prices themselves and Apple received a 30 percent cut. This would hurt the traditional wholesale model, where publishers set the retail price and the retailers set the sales price.

The pricing model came into force in 2010 after the book publishers had asked Amazon Inc. to increase the price of e-books on its website. Amazon offered new bestsellers at $9.99 to attract its Kindle readers. Several publishers have argued that the practice hurts their ability to sell more expensive titles.

In 2011, a lawsuit was filed against Apple and the publishers, objecting to the pricing model. The plaintiffs listed in the lawsuit are Anthony Petru of Oakland, Calif., and Marcus Mathis of Natchez, Miss. The lawsuit has sought restitution and damages to parties included in the suit and also declaration that the agency pricing model is illegal.