Apple sued over ebook price-fixing

Apple and a string of major publishers have been named in an ebook price fixing lawsuit.

Apple sued over ebook price-fixing

Ebooks have taken off in the last year, with Amazon’s sales for its Kindle booming, but the industry has come under fire for a new pricing model – the “agency model” – that makes discounting books difficult and results in higher prices for consumers.

According to the class action lawsuit, filed in US Distict Court of Northern California, Apple colluded with publishers to ensure ebook prices wouldn’t be lower than those for physical books.

Amazon’s pro-consumer pricing meant that to enter the ebooks market Apple would likely be forced to sell at least some ebooks near or below its wholesale costs

Along with Apple, five of the “big six” US publishers were named in the court papers – Hachette, HarperCollins, Macmillan, Penguin, and Simon and Schuster.

The suit was brought by law firm Hagens Berman, which said Apple wanted to twist the ebook market into an environment that matched its walled-garden iTunes music store.

“As part of the unlawful agreements, and seeking to leverage its dominant position via the Apple iOS platform, Apple and the publishers agreed that prices for ebooks that were offered through the iBookstore would be calculated by a formula tied to physical books,” the lawsuit said.

The plaintiffs went on to claim that Apple distorted the market because it didn’t want to get involved in a price war with Amazon, which used low prices to hook consumers on the Kindle.

“If Amazon continued to solidify its dominant position in the sale of ebooks, strong network effects would make it difficult to dislodge Amazon,” the suit claimed.

“Amazon’s pro-consumer pricing meant that to enter the ebooks market Apple would likely be forced to sell at least some ebooks near or below its wholesale costs for an extended period of time. Apple did not want to enter the ebooks market subject to this margin pressure caused by Amazon’s pricing.”

Apple has not responded to a request for comment on the situation or the strength of the claims.

It’s not the first time that Apple has come under fire over its pricing tactics for selling ebooks more profitably. In May, an independent developer selling ebooks through an iOS app blamed Apple for pushing it out of business with the new pricing model.

Under reporting?

In a separate case, the Hagens Berman law firm said it was also investigating claims from authors that several large ebook publishers were under-reporting the number of copies sold, paying authors less than their share of royalties.

The investigation follows reports from disgruntled authors, Hagens Berman said.

“Ebook authors typically receive royalty statements, which report the number of ebooks sold in a specified time period. The authors are paid based on these sales numbers,” the company said.

“According to reports, the so-called ‘big six’ ebook publishers may be using an outdated accounting systems to track the sales of ebooks. As a result, some authors have reported various accounting errors on their statements, including the under-reporting of sales of the ebooks.”

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