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August 12, 2011 • eBooks

Class Action suit filed against Apple, 5 other eBook Publishers

 

As reported on Macrumors.com, Hagens Berman, a Seattle-based law firm that specializes in  class-action suits involving antitrust and intellectual property, has filed a class action lawsuit against Apple and 5 other Publishers of eBooks alleging collusion of Apple and the 5 other named defendants to defeat Amazon’s attempt to sell eBooks at discount prices.  Here is an excerpt from the Hagens Berman website:

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.

The “Agency Model” described in the suit is based upon the arrangement between publisher and reseller that allows for the publisher to set a price for their content and from which the reseller, in this case Apple, takes their cut (30% in the case of Apple).  Resellers who refuse to adopt this model (read Amazon.com) are essentially prevented from selling content from that particular publisher.  This allegedly prevents Amazon from selling eBooks at a loss to drive consumers to its Kindle platform.

This is an interesting development in the eBook war.  I am no legal analyst, but I am not sure how much this may constitute a violation of any anti-trust statute.  I suppose there may be legal issues related to “price fixing” by the publishers.  Apple’s inclusion in the suit as a non-publisher is also notable.  The accusation is that Apple is actively trying to kill the Kindle, and has worked with publishers to fight maintain the current price structure for digital content.  It is interesting to see what I consider the opening volleys of fire in the eBook war that may be fought for some time to come.

What are your thoughts?

Source: MacRumors

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