Apple Sued Over E-Book Pricing

Apple and a group of book publishers were accused in a lawsuit f illegally fixing e-book prices to boost profits and force e-book rival Amazon to abandon its pro-consumer discount pricing and the lawsuit filed in the Northern District of California claims Apple and Hachette, HarperCollins, MacMillan, Penguin, and Simon & Shuster illegally worked together to enable an agency model as the standard for e-book sales, rather than the wholesale model that is used in the physical publishing industry. The suit was brought by law firm Hagens Berman and the firm said Apple wanted to twist the ebook market into an environment that matched its walled-garden iTunes music store……………..

Hagens Berman has filed a nationwide class-action lawsuit claiming that Apple Inc. and five of the nation’s top publishers, including HarperCollins Publishers, Hachette Book Group, Macmillan Publishers, Penguin Group Inc. and Simon & Schuster Inc. illegally fix prices of electronic books, also known as e-books. Filed in the U.S. District Court for the Northern District of California, the lawsuit alleges that the publishers and Apple colluded to increase prices for popular e-book titles to boost profits and force e-book rival Amazon to abandon its pro-consumer discount pricing. According to the suit, publishers believed that Amazon’s wildly popular Kindle e-reader device and the company’s discounted pricing for e-books would increase the adoption of e-books, and feared Amazon’s discounted pricing structure would permanently set consumer expectations for lower prices, even for other e-reader devices. The firm believes that Apple was involved in the scheme. The complaint alleges that Apple believed that it needed to neutralize the Kindle when it entered the e-book market with its own e-reader, the iPad and feared that one day the Kindle might challenge the iPad by digitally distributing other media like music and movies.

 

The complaint claims that the five publishing houses forced Amazon to abandon its discount pricing and adhere to a new agency model, in which publishers set prices. This would prevent retailers such as Amazon from offering lower prices on e-books. Apple had already established such a model on its App store, taking 30 percent revenue on sales while the publishers receive 70 percent. If Amazon defied the publishers and tried to sell e-books below the publisher-set levels, the publishers would simply deny Amazon access to the title, the complaint details. The defendant publishers control 85 percent of the most popular fiction and non-fiction titles. While free market forces would dictate that e-books would be cheaper than their hard-copy counterparts, considering lower production and distribution costs, the complaint shows that as a result of the agency model and alleged collusion, many e-books are more expensive than their hard-copy counterparts. According to the complaint, the prices of e-books have risen as much as 50 percent since the switch to an agency model. The lawsuit claims Apple and the publishers are in violation of a variety of federal and state antitrust laws, the Sherman Act, the Cartwright Act and the Unfair Competition Act.

 

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