Look at it this way: Apple agrees with the publisher to sell the book for $14.99. For some reason the same publisher than makes an agreement to sell through Amazon for $9.99. Apple won't sell much. People who pay $14.99 and then find out they could have bought the same book for $9.99 at Amazon will be very unhappy and angry with Apple. So what would you expect Apple to do? I would expect them to stop selling the book for $14.99, and since they can't sell it for $9.99, they are not going to sell it at all.
That's not what's happening though.
Before, with the wholesale model, a publisher and a company (Company A) negotiates a price that the company will pay to get the book for. Company B does the same thing. Company C does the same thing. The price Company A, Company B, Company C, etc. paid the publisher for the book could all be different or the same.
These companies were now free to sell the book for whatever price they felt will generate sales, be profitable, etc. It could have been more than the negotiated price or it could have been less than the negotiated price. Regardless of the selling price, the publisher still got paid. But publishers didn't like this wholesale model because
- they felt that if a company sold a book for less than the negotiated price, it devalued the book or made the book look like it wasn't any good (a flop).
- the publisher couldn't always negotiate a better price in their favor, especially if a company had selling and pricing power.
Apple didn't like the wholesale model because they couldn't (and likely didn't want to) compete with Amazon, Barnes & Noble, et al on price since Amazon, Barnes & Noble, et al have been in the book selling business a lot longer than Apple and thus have a larger customer base. This gives Amazon, Barnes & Noble, etc. pricing power. As a result, Amazon, Barnes & Noble, etc. are all able to negotiate a lower price than what Apple can get the book from the publisher for. Apple didn't like this because it would affect their profit margins.
Enter the Agency model. The publisher offers a book to Company A, Company B, Company C, etc. for $X; $X is the same for everyone. Those companies now must sell the book for $Y. $X is 70% of whatever $Y is.
But if the publisher is still getting their 70% cut ($X), then why should a company be prevented from selling the book at whatever price they see fit? This is the problem. It's price fixing.
Apple created this Agency model so that Apple didn't have to compete on pricing. Apple saw that they couldn't compete with Amazon, Barnes & Noble, et al on price so Apple came up with this Agency model. Plus, Apple wanted to be guaranteed a 30% cut of the selling price; Nice and consistent profit margin there.
Let's say this happened with a physical book and not an eBook. Say a publisher offers a book to Company A, Company B, Company C, etc. for $X and those companies have to sell the book for $Y, but the book turns out to be a total flop. How are these companies suppose to get rid of the books if they're not allowed to mark them down below $Y? Who wants to be stuck with inventory that doesn't sell? When a item doesn't sell well, a company puts that item on clearance to move it out. But because this is a digital copy and there's no physical inventory, the publishers think it's okay.
Interestingly, we don't see Apple complaining about how unfair it is that other tablet manufacturers have to pay more for their touch screens than Apple does. Since Apple has selling power with the iPad, Apple's able to negotiate a more favorable price for the touch screens than their competitors. Why isn't Apple pushing for a fair pricing model on tablet parts like they did with eBooks? As long as something benefits Apple, it must be okay.