Schumer urges Justice Department to drop Apple e-books suit

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The Justice Department filed suit in April against Apple and two publishers, Macmillan and Penguin Group, for the alleged price-fixing of e-books.

Three other publishers, Hachette, HarperCollins and Simon & Schuster, agreed to the government's terms to avoid litigation.

The government said Apple and the five publishers were unhappy that Amazon was driving down the price of e-books. Amazon had set the price of all of its e-books at $9.99.

According to the government's complaint, the companies conspired to set up a new business model, called the agency model, which raised the price of many e-books by about $2 to $3.

Under agency pricing, the publishers, not bookstores, set the retail price of e-books. 

But Schumer argues that agency pricing helped to free the e-book market from Amazon's dominance. He notes that under the old model, Amazon controlled 90 percent of the market, but after the publishers instituted the new pricing scheme, Amazon's share fell to 60 percent.

He writes that the new model actually caused prices on many older book titles to fall. 

"The Justice Department has ignored this overall trend and instead focused on the fact that the prices for some new releases have gone up. This misses the forest for the trees," Schumer writes. "While consumers may have a short-term interest in today's new release e-book prices, they have a more pressing long-term interest in the survival of the publishing industry."

He expresses concern that the filing of the lawsuit "empowered monopolists and hurt innovators."

"I believe it will have a deterrent effect not only on publishers but on other industries that are coming up with creative ways to grow and adapt to the Internet," the Democratic senator writes.

He urges the Justice Department to adopt comprehensive guidelines for when to file antitrust suits. Although the department has guidelines for when to challenge mergers, no such guidelines exist for non-merger investigations.

"The administration needs to reassess its prosecution priorities," Schumer writes.

The Justice Department did not immediately respond to a request for comment.