Hagens Berman Files Class-Action Lawsuit Against Apple and Publishers
Berman noted that while Amazon derived profit from the sale of its Kindle and related accessories, likely allowing the company to discount e-books, Apple was steadfast in maintaining the 70/30 revenue split it demanded with its App Store.
"Apple simply did not want to enter the e-book marketplace amid the fierce competition it knew it would face from Amazon and its discounted pricing," Berman added. "So instead of finding a way to out-compete Amazon, they decided to choke off competition through this anti-consumer scheme."
The complaint notes that Apple CEO Steve Jobs foreshadowed the simultaneous switch to agency pricing and the demise of discount pricing in an interview with The Wall Street Journal in early 2010. In the interview, he was asked why consumers would buy books through Apple at $14.99 while Amazon was selling the same book for $9.99. "The prices will be the same," he stated.
While free market forces would dictate that e-books would be cheaper than the hard-copy counterparts, considering lower production and distribution costs, the complaint shows that as a result of the agency model and alleged collusion, many e-books are more expensive than their hard-copy counterparts.
"As a result of the pricing conspiracy, prices of e-books have exploded, jumping as much as 50 percent," Berman said. "When an e-book version of a best-seller costs close to—or even more than—its hard-copy counterpart, it doesn't take a forensic economist to see that this is evidence of market manipulation."
Berman pointed out that The Kite Runner, for example, costs $12.99 as an e-book and only $8.82 as a paperback.
"What is most loathsome about the behavior of Apple and the publishers is that it is stifling the power of innovation, the very thing Apple purports to champion," Berman added. "A few big-business heavyweights are taking a powerful advancement of technology that would benefit consumers and suffocating it to protect profit margins and market share."