Lawsuit Filed Against Apple and Book Publishers Over Illegal Ebook Price Fixing [Apple]

Anything's possible when people club together—just look at the UK riots as a really bad example of that. Class-action law firm Hagens Berman's seeking more plaintiffs for its lawsuit against Apple and five publishers over illegal ebook price-fixing.

The publishers include HarperCollins, Hachette, Macmillan, Penguin and Simon & Schuster—five of of the top names in the book publishing world. If Hagens Berman's case finds that Apple and the publishers colluded to set ebook prices at such a high level for their greedy little Mr. Burns moment, damages could be awarded to the plaintiffs, plus an injunction could see ebook prices lowered. More details are available in Hagens Berman's press release below, along with contact details at the bottom.

SEATTLE — August 9, 2011 – Hagens Berman, a consumer rights class-action law firm, today announced it has filed a nationwide class-action lawsuit claiming that Apple Inc. (NASDAQ:AAPL) and five of the nation's top publishers, including HarperCollins Publishers, a subsidiary of News Corporation (NASDAQ: NWSA), Hachette Book Group, Macmillan Publishers, Penguin Group Inc., a subsidiary of Pearson PLC (NYSE: PSO) and Simon & Schuster Inc., a subsidiary of CBS (NYSE: CBS), 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.

"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 Hagen 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."

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 and extinguished competition so that retailers such as Amazon could no longer offer lower prices for e-books.

If Amazon attempted 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.

Berman noted that while Amazon derived profit from the sale of its Kindle and related accessories, likely allowing the company to discount e-books, Apple was steadfast in maintaining the 70/30 revenue split it demanded with its App Store.

"Apple simply did not want to enter the e-book marketplace amid the fierce competition it knew it would face from Amazon and its discounted pricing," Berman added. "So instead of finding a way to out-compete Amazon, they decided to choke off competition through this anti-consumer scheme."

The complaint notes that Apple CEO Steve Jobs foreshadowed the simultaneous switch to agency pricing and the demise of discount pricing in an interview with The Wall Street Journal in early 2010. In the interview, he was asked why consumers would buy books through Apple at $14.99 while Amazon was selling the same book for $9.99. "The prices will be the same," he stated.

While free market forces would dictate that e-books would be cheaper than the 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.

"As a result of the pricing conspiracy, prices of e-books have exploded, jumping as much as 50 percent," Berman said. "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."

Berman pointed out that The Kite Runner, for example, costs $12.99 as an e-book and only $8.82 as a paperback.

"What is most loathsome about the behavior of Apple and the publishers is that it is stifling the power of innovation, the very thing Apple purports to champion," Berman added. "A few big-business heavyweights are taking a powerful advancement of technology that would benefit consumers and suffocating it to protect profit margins and market-share."

According to the lawsuit, Apple and publishers were concerned that Amazon's $9.99 uniform pricing for bestsellers would create market pressures for other e-booksellers – including Apple – to do the same, cutting into profitability.

The lawsuit goes on to claim that because no publisher could unilaterally raise prices without losing sales, they coordinated their activities, with the help of Apple, in an effort to slow the growth of Amazon's e-book market and to increase their profit margin on each e-book sold.

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.

The named plaintiffs, Anthony Petru, a resident of Oakland, California, and Marcus Mathis, a resident of Natchez, Mississippi, each purchased a least one e-book at a price above $9.99 after the adoption of the agency pricing model.

Once approved, the lawsuit would represent any purchaser of an e-book published by a major publisher after the adoption of the agency model by that publisher.

The lawsuit seeks damages for the purchase of e-books, an injunction against pricing e-books with the agency model and forfeiture of the illegal profits received by the defendants as a result of their anticompetitive conduct which could total tens of millions of dollars.

Hagens Berman invites potential plaintiffs to contact the office at ebooks@hbsslaw.com or by phone at 206-623-7292.

You can learn more about this case by visiting www.hbsslaw.com/ebooks.

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Apple and Big Publishers Conspired To Fix Ebook Pricing, Lawsuit Alleges

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Apple and major publishers face lawsuit over ebook 'price fixing'

 Bitter fruit ... an Apple store in California. A law firm is alleging the company worked with publishers to push ebook prices up. Photograph: Russel A Daniels/AP

A class-action lawsuit has been filed in the US alleging that Apple and five major publishers "colluded ... to illegally fix prices" of ebooks.

The lawsuit, filed by law firm Hagens Berman in California northern district court, claims that HarperCollins, Hachette Book Group, Macmillan, Penguin and Simon & Schuster conspired with Apple to increase ebook prices in order "to boost profits and force ebook rival Amazon to abandon its pro-consumer discount pricing", and that they are "in violation of a variety of federal and state antitrust laws".

The complaint centres on the agency model – used by Apple for iTunes and by most major publishers for ebook sales – in which the publisher, rather than the retailer, sets the retail price of ebooks. The model has already sparked investigations in Europe and the UK, with the Office of Fair Trading investigating whether certain publisher-retailer arrangements "may breach competition law", and the European commission looking into whether companies have colluded to keep ebook prices high.

Naming two plaintiffs, California resident Anthony Petru and Mississippi resident Marcus Mathis – both of whom purchased at least one ebook for over $9.99 after the adoption of the agency pricing model – the lawsuit, once approved, will represent any purchaser of an ebook by a major publisher after the adoption of the agency model and could, according to Hagens Berman, be worth "tens of millions of dollars".

It alleges that the five publishers "feared" Amazon's move to price ebooks at $9.99 – a figure considerably below physical book prices. The pricing "threatened to disrupt the publishers' long-established brick-and-mortar model faster than [they] were willing to accept", and to set low consumer expectations for ebook prices.

Pointing to Macmillan's battle with Amazon over the agency model last year, which ultimately saw the online retailer capitulate to Macmillan's introduction of the model "because Macmillan has a monopoly over their own titles", the lawsuit says the five publishers "forced Amazon to abandon its discount pricing and adhere to a new agency model ... If Amazon attempted to sell ebooks below the publisher-set levels, the publishers would simply deny Amazon access to the title." This has, the suit says, seen the prices of new ebooks increase to an average of $12-15 – a rise of 33 to 50% – and reach a point where they are often more expensive than physical editions.

"As a result of the pricing conspiracy, prices of ebooks have exploded, jumping as much as 50%. When an ebook version of a bestseller 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," said Steve Berman, founding partner of Hagens Berman, in a press release about the suit. "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. We intend to prove that Apple needed a way to neutralise Amazon's Kindle before its popularity could challenge the upcoming introduction of the iPad – a device Apple intended to compete as an e-reader."

But while publishers were likely to be "concerned" at the law suit – "it's another force ranging against them, and another example where they look like they are against rather than for the consumer" – The Bookseller's deputy editor Philip Jones said there was "no smoking gun" in the evidence.

"There are lots of accusations of collusion and conspiracy, rather like a John Grisham novel, but I couldn't find a single instance where they had proof, or even hinted that they had proof," he said. "There is a question over how the agency model has been implemented and whether that is illegal in the US and Europe, and that is what the regulatory bodies on both sides of the pond are looking into, but they are insinuating that there was collusion between Apple and these major publishers and I don't believe they can make the case. The lawyers can write that collusion was necessary for agency to occur, and give logic to that argument, but that doesn't prove that collusion actually took place."

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Facebook acquires ebook design firm, but should publishers worry?

Red alert for publishers: Facebook has just acquired Push Pop Press, an ebook publisher and app maker. Stuart over on our Apps Blog has the skinny, but the interesting point here is what this talent-acquisition could point to in Facebook's strategy.

Push Pop Press is a contemporary of social magazine Flipboard. Photo by Johan Larsson on Flickr. Some rights reserved

The talent in question is the two founders, Mike Matas and Kimon Tsinteris, but looking through their past work gives an intriguing hint to the influence they might have at Facebook on storytelling. As they say in their farewell statement on the Push Pop Press site: "Now we're taking our publishing technology and everything we've learned and are setting off to help design the world's largest book, Facebook."

In an earlier interview with the Apps Blog, Tsinteris explained how Push Pop Press aimed to reimagine the book using the interactivity made possible by apps.

"We really focused on... the relationship between the viewer and the content. After that, social is a great way to let those viewers share the content with their friends. We see social as the next step on top of a great interactive consumer experience."

Our Choice, the app Push Pop Press made for Al Gore as the ebook version of his sequel for An Inconvenient Truth, is a truly phat app and one that has taken a huge amount of material - text, some glorious images and video - and, particularly on iPad, made them navigable in a compelling way that doesn't feel overwhelming, despite the volume of content.

Matas runs through the Our Choice app in this Ted talk from earlier this year.

Assuming their skills will be used beyond a kick-ass Facebook app itself, applying those kind of principles and aesthetics to Facebook starts to get very interesting. There have been limited experiments with presentation on Facebook; a few amateur photographers played with the new profile layout introduced late last year, and some photojournalists have tried storytelling on Facebook - see the Basetrack project.

Public 'Facebook Pages' intended for brands or organisations can be seen by anyone, as opposed to personal profile pages for individuals where readers would (usually) need to be a friend to get full access.

But the dynamics aren't really set up for storytelling, or even selecting the best content. There are virtually no design options (come back MySpace, with your creaky skin-HTML-pasted-into-the-body-field workarounds), so no way of designing to suit your project, limited ways of flagging up older content and crucially, no way of reorganising content like photos, which means it's not possible to favourite or filter. Tags only extend to people with Facebook profiles.

One of the Basetrack project's photojournalism pieces, taken in Afghanistan and published on Facebook

What would Facebook need to offer truly comprehensive storytelling tools? Look at our Vimeo story this week on how the video site fenced off an artier audience and better quality content by offering slick, design focused tools. Facebook's interface is, understandably, designed to be as simple and consistent as possible when handling such a large volume of data. Compromising some of that to offer more flexible, creative tools for audio slideshows, variable photo and video sizes, and perhaps skins that allow stronger identities for projects is an exciting project, but one that could have implications for news publishers.

Facebook would never pretend to be anything other than an engineering company (and a look through the quality of the photos its users typically upload would confirm the priority is quantity over quality) but if Facebook could start to get serious about an interface that provided creative tools, from ecard makers and light video editing for consumers to a customisable, magazine-style layout for professional publishers. Think of a Storify-style interface even.

No-one is suggesting that Facebook is about to start publishing ebooks, but with expertise like Push Pop Press coming on board, significant foundations for public-facing journalists' pages described as 'a social newspaper' already established, and a vast global audience... publishers shouldn't take this one lying down.

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Religious eBook Sales Rise, Says Publishers Association

|Sat, Mar. 19 2011 04:13 PM EDT

The overall figures for e-books show that e-book net sales totaled $32.4 million in January 2010 and jumped to $69.9 million in the same time period this year.

While the demand for digital books is on its highest peak, conventional hardcover and paperback books is continuing to decline.

AAP reports that hardcover sales fell from $55.4 million in January 2010 to $49.1 million this year, while paperback sales dropped from $104.2 million to $83.6 million during the same period.

Reports show that technological advances have worried the book industry as users have been steadily getting comfortable with the use of devices such as the iPad and Kindle. Companies like Novo Ink, a faith-faith digital publisher, have been taking advantage of the eBook popularity.

Last year alone, Zondervan the world’s leading Bible publisher, announced that their eBibles represent more than 40 percent of the company’s eBook revenue, and that it has since then outsold some traditional hardcover Bible products.

Order Online: Economics : A Very Short Introduction

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