I realize that high volume Retailers like Amazon negotiate lower prices in exchange for a promise of guaranteed volume. But in the end, the Publisher's product price has to be set (at least somewhat) by the Publisher. (Even in the example of Amazon's Print-on-Demand publishing -- the author has a minimum price they must set for their book -- depending on whether the inside has black/white pics [ie. $12.99] or color pics [ie. $21.99].)
Is this traditional Wholesale/Retail model gone? Are the publishers Mandated to take a percentage of actual sales price (agency)? Does Amazon REALLY have the POWER to DICTATE the price of the Publishers product? Yikes! It's not Amazon's product -- why should THEY have this power?
The publisher's problem is that hardcover books generate most of their revenues. These hardcover books are typically $15 to $25, with typical sell-in to the wholesaler/retailer at $12 to $15. The publisher's arrangement for ebooks were likely similar, they sold ebooks to Amazon at around $12, probably thinking that Amazon would sell them for one or two dollars cheaper than brick and mortar retailers selling hard covers, like they usually do for hard covers.
With Amazon selling bestselling ebooks at $10, it basically killed hard cover sales at brick and mortar stores which were selling them for more, sometimes 2x or more. Publishers got their money and weren't hurting like the brick and mortar retailers, but they were then looking down the barrel of gun with their revenues decreasing as it was doubtful to them that Amazon would continue to sell $12 ebooks at $10. Eventually, Amazon would have come calling to have the wholesale price to them reduced to $6 or $8 or something. This was what the retailer was worried about, and that Amazon was killing their distribution network.
I don't think this is an unusual tactic for Amazon, and this may be one of their strategies to always get the best wholesale price possible. Amazon has quite the negotiating power as they are the dominant paper book seller too, a divorce from Amazon would be very costly to them, and the publishers are basically wimps. By the time of Apple's entry into the eBook market, was Borders still alive? Don't recall, but suffice it to say, brick & mortar book retail was dying and B&N is in its death throes. With them dead, what negotiating power would the publishers have against Amazon?
Maybe there is an argument that cheaper prices meant more people would read (novels, books, etc). But Steve Jobs was right about people not reading books anymore. Before the digital revolution, reading books was a much bigger thing. There wasn't many things competing for your time. Now, everything competes for your time. Low demand definitely means the prices of books were going to go down regardless of models. Yes, the DOJ is basically the Javert character from Les Miserables here. Well, at least before he developed a conscience.