A Seattle law firm has filed a class-action lawsuit accusing Apple and five book publishers of engaging in price fixing around sales of electronic books. The suit, filed today in U.S. District Court in Northern California, alleges that Apple and HarperCollins Publishers, Hachette Book Group, Macmillan Publishers, Penguin Group Inc. and Simon & Schuster “colluded” on book prices in order to force Amazon.com to “abandon its pro-consumer discount pricing.”

“Fortunately for the publishers, they had a co-conspirator as terrified as they were over Amazon’s popularity and pricing structure, and that was Apple,” said Steve Berman, attorney representing consumers and founding partner of Hagens Berman. “We intend to prove that Apple needed a way to neutralize Amazon’s Kindle before its popularity could challenge the upcoming introduction of the iPad, a device Apple intended to compete as an e-reader.”

In a press release, Berman, a class-action specialist, continued:

“As a result of the pricing conspiracy, prices of e-books have exploded, jumping as much as 50 percent. When an e-book version of a best-seller costs close to – or even more than – its hard-copy counterpart, it doesn’t take a forensic economist to see that this is evidence of market manipulation.”

The suit also notes that Amazon’s pricing “threatened to disrupt the publishers’ long-established brick-and-mortar model faster than the publishers were willing to accept.”

You can read the entire press release and see a copy of the suit here.

[scribd id=61967505 key=key-11bnjykmi10uqhbea50k mode=list]

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Comments

  • http://twitter.com/thDigitalReader Nate the great

    I can read the press release where, exactly? There’s no link.

    • johnhcook

      Try the link again in the last sentence. That should be working now. Also, I uploaded the document into Scribd for easy reading.

  • http://twitter.com/JijiNakaba Jiji Nakabayashi

    Hell yeah. No coincidence that the $9.99 bestseller disappeared after Apple got involved. 

  • Mike Bentley

    O.o They seem confused. This seems to demonstrate that the legal team does not understand how supply and demand works. There is a demand for an ebook at $13; similarly, there is a demand for the ppbk version of the same book at 9 bucks. As I understand it, ebooks are outselling hard copy versions, so it would seem to follow that the publishers crank up what sells until they reach the threshold of buyer tolerance. Aside from that, I thought the deal was that Apple entered the ebook market with iOS devices, having decided to go with allowing publishers to determine prices, and set Apple’s cut at 30%. Amazon had been overriding publisher prices to entice volume sales and warring against other etailers, but was charging publishers a LOT more than 30%. Apple entering the market provided more competition, not more conspiracy. Lastly, there’s more than two ebook etailers out there, etailers need to work with publishers to get content, another bit of supply and demand, so you know that gives publishers a bit of leverage with each etailer. Amazon sells a lot of ebooks, publishers want to work with them, the Kindle is a very good device. (My beef is with the state of art of the files containing the ebooks: all the wretched DRM in place coupled with the relatively wretched reader software for various mediocre ebook data formats.)

    • SkepticalGuy

      They aren’t confused.  There’s some background here that I don’t think you’re aware of.   From http://www.authorsguild.org/advocacy/articles/how-apple-saved-barnes–noble.html , which tells quite an interesting story:

      Amazon’s most potent weapon in the e-book format and device war, however, was the strategy it deployed so effectively in its conquest of online bookselling: using its seemingly limitless financial resources to discount books at rates no competitor could long sustain. Amazon now pushed this tactic to a new level, routinely buying e-books at wholesale prices of $13 and $14 and immediately selling them at a loss, for $9.99. This not only built customer enthusiasm for the Kindle and e-books, but helped crush online and offline competitors that were selling physical books. Amazon could win the future as it finished off the past. . . .

      Enter Apple
      On Wednesday, January 27, 2010, Steve Jobs announced the launch of the iPad and the iBookstore.Apple wouldn’t sell e-books under the reseller model that Amazon had been using to lock down the market. (Under that model, the publisher sells e-books to a reseller at a discount of about 50%. The reseller can then sell the e-book at any price, constrained only by antitrust law and the reseller’s ability to absorb losses.) Instead, Apple would sell e-books under the same “agency model” it used for iPhone apps. Under the agency model, Apple acts as the publisher’s agent, selling e-books at the price established by the publisher and taking a 30% commission on each sale. To participate, a publisher would have to agree to a set of ceilings on e-book prices, generally $12.99 or $13.99 for new books. A publisher would also have to agree not to sell to others under more favorable terms.

      Quite a clever coup Apple pulled off there, although how, exactly,  Apple was in a position to force its model on the publishing industry as a whole is unclear.  Seems to be some restraint of trade issue in there somewhere, or maybe it was just Apple’s market clout combined with the publishers’ desire for a counterweight to Amazon.  As the story explains, Apple’s coup had unintended consequences;  clear current figures are hard to come by, but indications are that B&N has a much larger market share in ebooks than Apple.

      • Azhanei

        Which is why suing to me is a dangerous thing. Amazon was no victim in this (and spare me this consumer advocacy line from the law firm). And really, neither are the consumers. They’re just mad because Amazon feeds them a false reality and the industry discounting print books newly onsale hasn’t helped. DeBeers fixes the diamond market prices. Nobody’s complaining diamonds cost too much because they never knew any differently.

  • http://www.smashwords.com MarkCoker

    The lawsuit is bogus.  Since most retailers cannot sell all titles below cost forever, publishers have always *effectively* set the purchase price anyway by defining the wholesale discount.

    The agency model will lead to lower retail prices.  In the long run, the marketplace is in control.  Consumers determine prices based on their buying behavior.  Here at Smashwords, we’re on the agency model and our authors and publishers have set a collective average price of our 65,000+ titles of under $4.00.  Many of these titles are scaling the bestseller lists.  If you don’t want to pay $13.00 for an ebook, buy an indie ebook. Most of the major retailers – Apple included – carry our books.  Consumers are in control here.

    This class action is merely an opportunistic attempt of a law firm to rake in fees.

    Authors and publishers should have the right to set the price they want.

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