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The question of what should people be paying for ebooks has been raging since the moment the first ereader hit the shelves. Google and Amazon have now become locked into a pricing standoff which has created a storm of deals for customers, but may enhance some of the other problems on the horizon for Apple.

Huffington Post Books reported that  Google Play and their bargain-basement launch offers have caused Amazon to have a bit of a moment. Is this the dawn of a shiny new competitor for the virtual retail giant?

Google Play, which seems to be remarkably similar to Amazon in their product base and selling method, have opened by offering some of their biggest name books, movies and music for just 25c. Amazon have, in response, lowered their prices to match, thus reducing the appeal of the new venture and keeping their coveted spot as the lowest of the low. (In regards to pricing, you understand.)

In a slightly related tangent, The Wall Street Journal has revealed that there is a lawsuit pending by the US Justice Department which accuses Apple and five major publishing houses (including HarperCollins Inc.) of colluding to fix ebook prices.

The case suggests that the ‘agency model’ was used in ebook contracts: publishers made deals which allowed them to set the ebook price for iBooks, of which Apple would take a 30% cut. The deals prevented the publishers from allowing any other retailer to sell those same ebooks at a lower price, which has caused the anti-trust case to be filed.

Apple has stated: ‘Nu-uh, no way, it’s all Amazon’s fault! They started it! We are just refusing to play with them’. Actually, they said:

“Before Apple entered the eBook market, one competitor, Amazon, the nation’s largest bookseller, had taken 90% of the market by pricing key eBooks below their wholesale cost”

Apple argue that they are simply using a pricing method which will be sustainable in the long-term for both their company and the publishing industry. A spokesperson pointed ut that if they continued to challenge Amazon the prices drops would harm them all.

There has certainly been support from the industry for their stance. Many retailers and publishers have spoken out saying that any action to stop or reduce the impact of the agency pricing method will give Amazon an advantage. Certainly, there is a consensus that if the stack ’em high/ sell ’em cheap model continues then there will be nothing left of the industry to sell.

Just what people will make of the Google Play Vs Amazon price smash in this arena remains to be seen. The fact that it has only pushed prices further down, even for this limited period, will certainly cause concern.