Does the Agency Pricing Lawsuit Have Merit?

Some may call this an era of evolution in book publishing, but it also could be called the Era of Major Lawsuits taking on golliaths, such as Google ... and now Apple and five major publishers: HarperCollins Publishers, Hachette Book Group, Macmillan Publishers, Penguin Group Inc. and Simon & Schuster Inc.

The issue at the center of the lawsuit against Apple and the five publishers is one that has plagued virtually every crevice of the industry: e-book pricing.

The nationwide, class-action suit was announced on Tuesday and filed by Hagens Berman law firm in the U.S. District Court for the Northern District of California on behalf of plaintiffs Anthony Petru of Oakland, Calif., and Marcus Mathis of Natchez, Miss.-who each have purchased at least one e-book for more than $9.99, following the implementation of the agency model. The suit 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 press release from Hagens Berman, announcing 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," commented Steve Berman-the attorney representing the plaintiffs in the case-in the press release. "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 suit calls into question the "agency model," which puts publishers in control of e-book prices; it claims that the publishers named in the suit "forced Amazon to abandon its discount pricing and adhere to a new agency model, which ... extinguished competition so that retailers such as Amazon could no longer offer lower prices for e-books.

Claiming that the "defendant publishers control 85-percent of the most popular fiction and non-fiction titles," Hagens Berman says that as a result of the alleged "pricing conspiracy," e-book prices have jumped "as much as 50 percent."

None of the lawyers Book Business Extra contacted felt they could comment on the case since it was just announced, and they were not yet familiar enough with the case's details. Extra also contacted several of the publishers in the suit. A Simon & Schuster representative stated that the company had no comment, and a spokesperson for Hachette Book Group (HBG) said that HBG had not been served with any complaint, so the company also currently has no comment. A representative of Macmillan commented, "Macmillan denies the allegations and intends to defend the case vigorously."

The suit cites "pricing conspiracy," and suggests that Apple and the five publishers are "in violation of federal and state antitrust laws, the Sherman Act, the Cartwright Act, and the Unfair Competition Act." The Sherman Antitrust Act was enacted by Congress in 1890 to "curb concentrations of power that interfere with trade and reduce economic competition," according to Encylopaedia Britannica. The Cartwright Act is California's antitrust law, which restricts conspiracies among two or more persons to restrain trade, and California's Unfair Competition Act-according to a summary of the law by the California State Legislature-authorizes public prosecutors and private plaintiffs to "to bring civil actions to enjoin acts of unfair competition or false advertising."

A question that may arise is: If Amazon is being "forced" to change its pricing by collusion between Apple and a group of publishers to fix prices, why isn't Amazon filing a suit? Is the publishers' e-book pricing simply a matter of free market trade?

"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," according to an article published Thursday morning on the Guardian.co.uk. "'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."

The class-action suit, which would represent anyone who has bought an e-book published by a major publisher since the agency model was implemented by that publisher, "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 stated in its press release.

While many believe that consumers already have come to expect discounted prices for e-books, and that Amazon had set a precedent with its $9.99 e-book pricing, a number of e-books priced higher were on last week's 10 best-sellers lists' for Barnes & Noble, The New York Times (fiction and nonfiction) and even Amazon. James Patterson and Michael Ledwidge's "Now You See Her," priced for the Kindle at $12.99, ranked No. 4 on Amazon's top-sellers list, and at No. 6 on Barnes & Noble's list (priced the same for the Nook). "A Stolen Life" by Jaycee Dugard, priced at $11.99, ranked at No. 5 on Amazon's list, and at No. 3 on Barnes & Noble's list of top sellers. Six of The New York Times' 10 e-book best-sellers last week in fiction were priced above $9.99.