Consumer group: E-book price fixing costs big bucks

Consumers will pay about $200 extra for e-books this year, the Consumer Federation of America says

E-book price fixing will cost consumers more than US$200 million this year, and U.S. antitrust authorities should take action against Apple and a group of publishers, the Consumer Federation of America said Monday.

The U.S. Department of Justice should take "vigorous action to stop this abusive practice," wrote Mark Cooper, director of research for the Consumer Federation of America, in a letter to the U.S. Senate Judiciary Committee's antitrust subcommittee.

Apple did not immediately respond to a request for a comment on Cooper's letter.

In December, a U.S. Department of Justice official said the agency was investigating e-book price fixing. A similar investigation by the European Union has targeted Apple and five e-book publishers.

The price-setting practices by Apple and the five publishers "constitute anticompetitive, anti-consumer collusive" behavior, Cooper wrote in his seven-page letter to the subcommittee. "Collusion between firms to set minimum prices is 'slam dunk' illegal, especially when one of the first effects of the price fixing, after increasing consumer cost, has been to raise publisher profits."

A lawsuit seeking class-action status filed in August in U.S. District Court for the Northern District of California, accuses Apple, HarperCollins Publishers, Hachette Book Group, Macmillan Publishers, Penguin Group and Simon & Schuster of working together to raise e-book prices in response to a discounted pricing strategy from Amazon.com.

The effect of raising e-book prices from an average of $9.99 to $12.99 or more raises publisher profits, Cooper wrote in his letter. E-books are cheaper to produce and distribute, leading book publishers to increase profits even as revenue is flat, he said.

"As technologies lower the cost of production and distribution, a scrum develops over the social surplus that is released," he wrote. "The sellers of information goods seem to think that because consumers were willing to pay a high price for their physical products in the past, they can keep the price high for digital products and pocket the cost savings as increased profit."

He called on the antitrust committee to pay close attention to e-book prices.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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