Apple's device dominance drives e-book price-fixing lawsuit

A new class-action lawsuit accuses Apple of conspiring with publishers to raise e-book prices

A Seattle law firm has targeted Apple in an e-book price-fixing lawsuit partly because of the company's dominance in smartphone and tablet sales, the firm's managing director said.

Hagens Berman Sobol Shapiro, a Seattle law firm, has filed a nationwide class-action lawsuit accusing Apple of conspiring with five top publishers to illegally fix the prices of e-books. The publishers named in the lawsuit, filed Tuesday in U.S. District Court for the Northern District of California, are HarperCollins Publishers, Hachette Book Group, Macmillan Publishers, Penguin Group and Simon & Schuster.

Apple's strong market share in the smartphone and tablet businesses gave it the power to drive up e-book prices across the industry, including at rival seller Amazon.com, said Steve Berman, managing director at Hagens Berman. "Apple was the catalyst to all of this," he said Wednesday.

The lawsuit accuses Apple of working with the publishers to raise e-book prices because publishers were concerned that Amazon.com's discounted pricing would permanently set customer expectations for lower prices, even for other e-reader devices. "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," Berman said.

Before early 2010, e-book prices at Amazon.com were routinely US$9.99 or lower, Berman said. Now, many top sellers are $12.99 and up. "The Kite Runner," by Khaled Hosseini, costs $12.99 as an e-book but less than $10 as a paperback.

Apple didn't respond to a request for comments on the lawsuit.

One consumer advocate said the lawsuit makes sense. "I have long been concerned about the apparent monopoly power Apple has been able to exercise through its Apps Store," said John Simpson, consumer advocate at Consumer Watchdog. "I believe the plaintiffs in this class-action suit have a very strong case and [I] am pleased they brought the action."

The lawsuit accuses the five publishing houses of forcing Amazon to abandon its discount pricing and allow them to set prices. If Amazon tried to sell e-books below the publisher prices, the publishers would deny Amazon access to the title, the complaint said. The five publishers control 85 percent of the most popular fiction and nonfiction titles, the law firm said.

Apple didn't want to enter the e-book market at the prices Amazon.com offered, Berman said. Instead of competing with Amazon, "they decided to choke off competition through this anti-consumer scheme," he said.

Anyone who purchased an e-book since January 2010 could be a plaintiff in the class-action lawsuit, Berman said. Hagens Berman is not sure yet the total cost to consumers because of the alleged price fixing, but it amounts to about $3 per e-book sold since then, he said.

The lawsuit seeks damages for the purchase of e-books, an injunction against pricing e-books through publishers and forfeiture of the profits received by the defendants due to price fixing. The total could be in the tens of millions of dollars, the law firm said.

The European Commission and several U.S. state attorneys general are also investigating e-book price fixing.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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Tags smartphonesApplelegaliPhoneconsumer electronicsantitruste-readersCivil lawsuitsU.S. District Court for the Northern District of CaliforniaConsumer WatchdogJohn SimpsonMacmillan PublishersPenguin GroupKhaled HosseiniHachette Book GroupSimon & SchusterHagens Berman Sobol ShapiroSteve BermanHarperCollins Publishers

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Grant Gross

IDG News Service
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