September 2, 2014

Lawsuits, Investigations of Ebook Pricing Proliferate and Consolidate

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Apple Inc. and the Big Six publishers are facing a widening array of investigations and lawsuits that allege they conspired to illegally fix ebook pricing in an effort to undermine Amazon’s competitive edge.

Class-action suits proliferated immediately after Seattle-based law firm Hagens Berman filed the initial suit (Petru v. Apple Inc. et al.) on August 9 in the U.S. District Court for the Northern District of California against Apple, HarperCollins Publishers, Hachette Book Group, Macmillan Publishers, Penguin Group Inc., and Simon & Schuster Inc. saying they colluded to restrain trade and violated antitrust laws.

Hagens Berman had been fighting attempts to consolidate (in federal court in Manhattan) the five subsequent competing class actions that emerged in the Southern District of New York, saying they were copycat cases that built on Hagens Berman’s work (which the other parties rebutted). After all the jostling, the Judicial Panel on Multidistrict Litigation ruled December 9 that it would be more efficient to consolidate the cases in Manhattan since “nearly all defendants, including all publishing defendants, are located in New York City, giving it a nexus to the allegations.”

Barnes & Noble and Random House were each named in at least one of the actions filed in the Southern District of New York.

In the meantime, government investigators in the United States and Europe are also conducting their own antitrust probes into ebook pricing.

The European Commission opened antitrust proceedings on December 6 to determine whether
Hachette Livre (Lagardère Publishing, France), HarperCollins (News Corp., USA), Simon & Schuster (CBS Corp., USA), Penguin (Pearson Group, United Kingdom) and Verlagsgruppe Georg von Holzbrinck (owner of Macmillan, Germany) have, with the help of Apple, engaged in illegal anti-competitive practices affecting the sale of e-books in the European Economic Area (EEA).

In March 2011, the commission raided the premises of “several companies active in the e-book publishing sector.”

Similarly, Sharis Pozen, the acting assistant attorney general in the Justice Department’s antitrust division, said on December 7, according to numerous reports, that the department was investigating alleged anticompetitive practices involving ebook sales. This was the first official confirmation of such an investigation.

A key point of interest, as LJ has reported, is the simultaneous announcement in January 2010 by the publishers that they were switching from a wholesale pricing model to an agency model for ebook sales. Under the former model, ebook sellers like Amazon could set their own price, which Amazon frequently set quite low in order to boost sales of its Kindle ereader.

On January 27, 2010, four days after the announcement that the publishers were switching to the agency model, Apple released the iPad and disclosed that it had agreements with the publishers to provide ebook content with prices based on the agency model, under which publishers set the retail price.

The principal allegation is that Apple and the publishers then colluded to force Amazon to accept the agency model, and if Amazon refused, since the agency model would prevent discounting, then the publishers would deny Amazon access to its titles.

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Michael Kelley About Michael Kelley

Michael Kelley is the former Editor-in-Chief, Library Journal.

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