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Class Action Claims E-Book Price Fixing Conspiracy By Apple And Publishers

Posted  August 17, 2011

A class action complaint in the U.S. District Court for the Northern District of California alleges that Apple and five major publishers engaged in a price-fixing conspiracy to block competition from Amazon’s e-reader, the Kindle.

The complaint in Petru et al. v. Apple, Inc. et al. alleges that prior to the launch of Apple’s iPad, Apple, HarperCollins, Penguin, Simon & Schuster, Macmillan, and Hachette Book Group violated federal and California state antitrust laws by conspiring to fix the prices of electronic books (e-books).

The plaintiffs contend that Apple was threatened by the popularity of Amazon’s Kindle and the potential that it would edge out Apple products in the market for mobile digital media devices.

According to the complaint, Apple wanted to protect its e-books from the price competition of Amazon, Sony and other e-book distributers that were selling e-books for $9.99.  The complaint claims that Apple sought to engineer an increase in Amazon’s prices in order to allow Apple’s iPad to better compete in the market for e-readers.

Plaintiffs allege that Apple orchestrated an agreement among publishers to sell e-books through an agency model.  This type of arrangement allowed publishers, not distributers, to set prices.  The agency model allegedly eliminated price competition among distributers.  According to the complaint, this model caused prices for e-books to rise by 30 to 50%, while the prices of hardcopy books remained constant in a competitive market.

If the class is certified, it will include purchasers of e-books from the five publisher defendants after the adoption of the agency model.

Tagged in: Antitrust Litigation, Price Fixing,