Justice Department confirms investigation of e-book industry

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The U.S. Justice Department’s antitrust arm said it was looking into potentially unfair pricing practices by electronic booksellers, joining European regulators and state attorneys general in a widening probe of large U.S. and international e-book publishers.

At a Judiciary Committee hearing in Washington on Wednesday, Sharis Pozen, the acting assistant attorney general in the Justice Department’s antitrust division, said the agency was ‘investigating the electronic book industry’ but gave fewdetails.

A Justice Department spokeswoman confirmed that the probe involved the possibility of ‘anticompetitive practices involving e-book sales.’

The acknowledgment comes a day after European regulators said they were investigating five of the largest international publishers: France’s Hachette Livre, News Corp.-owned Harper Collins, CBS’ Simon & Schuster, Britain-based Pearson Group’s Penguin and the German-owned Macmillan -- as well as Apple Inc.. Investigators said they were trying to determine whether the companies had ‘engaged in illegal agreements or practices that would have the object or the effect of restricting competition.’

Attorneys general in Connecticut and, reportedly, Texas, have also begun inquiries into the way electronic booksellers price their wares, and whether companies such as Apple and Amazon have set up pricing practices that are ultimately harmful to consumers.

When Amazon.com and its Kindle were the sole major player in the electronic book market, the company set the price of e-books at $9.99. But publishers found that the price was artifically low and sought a way to circumvent Amazon’s pricing control.

When Apple’s iPad came out last year, the company had deals in place with five major publishers to use a new pricing model, in which the publishing companies were able to set the prices and the retailers (such as Amazon and Apple) took a fixed cut of the retail cost, about 30%.

Soon after, e-book prices on Amazon and elsewhere began to rise, and now many bestselling books retail for $14, $15, $16 or more.

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-- David Sarno