Updated 12:30 p.m.
The Justice Department filed an antitrust suit today against Apple Inc. and a handful of publishers, alleging the companies conspired to drive up prices for e-books.
In the complaint, filed in U.S. District Court for the Southern District of New York, prosecutors allege that Apple colluded with Hachette Book Group, HarperCollins Publishers, Macmillan, The Penguin Group, and Simon & Schuster to raise the price of e-books in response to Amazon's practice of offering $9.99 electronic copies of new releases and bestsellers on its Kindle platform.
"Publishers saw the rise in e-books, and particularly Amazon's price discounting, as a substantial challenge to their traditional business model," reads the complaint. "The Publisher Defendants feared that lower retail prices for e-books might lead eventually to lower wholesale prices for e-books, lower prices for print books, or other consequences the publishers hoped to avoid."
At least 13 DOJ attorneys were involved in the drafting of the complaint. The lead agency official was Sharis Pozen, acting assistant attorney general for antitrust matters.
After "unilateral efforts" to steer Amazon away from the discount offerings, the complaint states, the publishers enlisted Apple in late 2009, which was gearing up for the launch of the iPad and considering whether or not to sell e-books for the device.
Following negotiations, prosecutors allege, Apple would sell e-books as an agent of the publishers rather than a traditional wholesaler, giving up its ability to set the retail price in exchange for a 30 percent commission on each copy sold. The publishers then allegedly set up similar agency agreements with all other retailers, giving the publishers the power to limit retail price competition among themselves.
"As a direct result, those retailers lost their ability to compete on price, including their ability to sell the most popular e-books for $9.99 or for other low prices," the complaint states.
A spokesperson for Apple could not immediately be reached for comment.
According to a Bloomberg report citing anonymous sources, Simon & Schuster, Hachette and HarperCollins settled their suits today.
Simon & Schuster Senior Vice President for Corporate Communications Adam Rothberg confirmed that the publisher filed a settlement in the case this morning. A HarperCollins statement confirmed that they also have settled.
U.S. Attorney General Eric Holder Jr. and Pozen are holding a press conference at noon today on a "[s]ignificant antitrust matter," which likely is connected to the Apple suit.
We will continue covering this story today as warranted.