Why is the Department of Justice Concerned about the Pricing of Ebooks?

The Department of Justice is considering a lawsuit against Apple and 5 other large publishers for allegedly colluding to raise the price of Ebooks. The issue is whether or not pricing of Ebooks should be set using an agency model or a wholesale model. In the agency model the author sets the price of their books and in the wholesale model retailers set the price of books. Which of these two models are used is very important to the growing number of indie authors as royalties that are paid are substantially different. Although book prices are usually lower using the agency model, royalties paid to the author are much higher than under the wholesale model.

At this time most retailers use the agency model for Ebooks written by indie authors. Large publishers that convert best selling paperback books, by well known authors, to Ebooks use the wholesale model for pricing. Herein lies the problem with possible collusion about keeping book prices high. A lawsuit with an outcome requiring all ebooks to follow the wholesale model could undesirably impact royalties paid to indie authors. Mark Corker of Smashwords recently called the DOJ and talked to them about this situation. Read about it here.nt


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