Justice Department May Sue Apple, Publishers

The companies are accused of collaborating to raise e-book prices.

By Ankita Rao | Posted Thursday, March 8, 2012, at 10:28 AM ET

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E-book sales in the U.S. are up 117 percent since 2010

Photo by ERIC PIERMONT/AFP/Getty Images.

The Justice Department may sue Apple and five major publishing houses for allegedly collaborating to hike up the price of e-books.

The Wall Street Journal, citing unnamed sources familiar with the matter, reports that federal officials have already warned the companies—including Simon & Schuster and Macmillan—that a lawsuit is potentially forthcoming, and that several of the publishers are holding talks in hopes of avoiding what could be a publicized and costly court battle.

Under a traditional book selling model, publishers had previously sold books for half the cover price, allowing retailers to set their own store price. But around the time Apple introduced its first iPad in 2010, the company moved to an "agency" model, where publishers decide the book price and Apple takes a 30-percent cut. As part of that move, Apple also reportedly stipulated that publishers couldn't let rival retailers like Amazon sell the same book for less, in effect making the agency model the new standard for much of the industry.

Justice Department lawyers say that Apple and the publishers violated federal antitrust laws by enacting their e-book plan, sources tell the Journal. The publishers, meanwhile, deny they acted jointly to hike up the prices.

The Washington Post reports that the European Union is dealing with their own e-book scuffle against the same publishers. Anti-trust officials performed unannounced raids at the companies last March.