Amended class-action lawsuit alleges Apple, publishers engaged in 'price-fixing conspiracy'

Posted:
in iPad edited January 2014


Even as Apple unveiled new partnerships with publishers focusing on ebooks and digital textbooks earlier this week, lawyers have amended a class-action lawsuit against Apple and five of the six big publishers accusing them of "deep antagonism" toward Amazon and its pricing scheme.



Law firm Hagens Berman filed the original lawsuit last August on behalf of a group of consumers who allege Apple and most of the publishing industry colluded to introduce an agency e-book pricing model for the iBookstore to disrupt Amazon's wholesale model.



HarperCollins, Hachette, Macmillan, Penguin and Simon & Schuster were named in the legal action. Random House was the only "big six" publisher left off the lawsuit, as it had elected not to sell its books using the agency model on iBooks for nearly a year before eventually caving last March.



The updated complaint, submitted Friday, contains new allegations, as well as information believed to support its case, such as quotes from late Apple CEO Steve Jobs and a number of publishing executives.



“The information we’ve included in this new filing shows the deep antagonism that publishers had toward Amazon for its consumer-friendly pricing,” said Steve W. Berman, managing partner at the firm and lead counsel on the case. “Since we began the action last August we’ve uncovered statements from executives at several publishers that demonstrate they viewed Amazon as a significant threat to the long-term survival of their profitability.”



Berman went on to assert that publishers took drastic and illegal action to protect their profits as their traditional business models were threatened.



“We intend to show that the big publishers saw the sea change in the delivery of books, and agreed to a price-fixing conspiracy as a last-gasp attempt to maintain profit margins,” he said.



The amended complaint gathered several possibly incriminating quotes from publishing CEOs. For instance, David Young, Chairman and CEO of Hatchett Book Group, said on record in 2009 that Amazon's $9.99 e-book pricing could represent "game over" for the publishing industry if it was "allowed to take hold in the consumer's mind."



Macmillan CEO John Sargent stated in a blog post that the agency model had made the market "stable and rational" by righting a "fundamentally unbalanced" situation. Meanwhile, Hatchett executive Arnaud Noury allegedly told an Amazon executive that a small price increase of two to three dollars would alleviate the "industry" problem.



“Noury’s meeting with Amazon is just one piece of a growing body of evidence that that the publishers were coordinating a plan to force Amazon to increase e-book prices, one way or another,” Berman said.



The lawsuit even drew upon Walter Isaacson's biography on Jobs by including the following excerpt as supposed evidence of a price-fixing conspiracy:



According to the complaint, following the release of the iPad and iBooks, the five publishers raised e-book prices by 30 to 50 percent and "completely changed the competitive pricing landscape that had existed for decades in the industry."



"As a direct result of this anticompetitive conduct as intended by the conspiracy, the price of eBooks has soared," the filing alleged. "The price of an eBook in many cases now approaches -- or even exceeds -- the price of the same book in paper even though there are almost no incremental costs to produce each additional eBook unit."



The lawsuit is asking for "damages for the purchasers of e-books, an injunction against pricing e-books with the agency model and forfeiture of the illegal profits received by the defendants."



From Kindle 1 to iBooks 2



Amazon made waves in November 2007 when it released its Kindle e-reader. The device was billed as the "iPod of reading" and quickly sold out. Adoption of e-books was aided by the fact that Amazon was willing to sell some titles at a loss in order to satisfy both customers' expectations and publishers' profit margins.











However, publishers chafed at Amazon's insistence on low-priced e-books. They also reportedly feared that the online retailer would eventually use its market power to reduce their share of profits for both e-book and physical book sales.



Recognizing a market opportunity, Apple stepped in to offer its upcoming iPad tablet and accompanying iBooks app as a possible alternative to Amazon. The tablet and accompanying e-reader software were unveiled in January 2010.











At the time, Jobs credited Amazon with pioneering the e-book market, while noting that Apple intended to improve on its model. "We're going to stand on their shoulders and go a bit further," he said.



According to one survey, 2010 e-book revenue jumped up more than 1200 percent from publishers' 2008 numbers. Net sales increased to 114 million in 2010 as the Kindle and iPad installed bases grew.



Amazon, in turn, stood on Apple's shoulders late last year to release the $199 Kindle Fire tablet. The device represented Amazon's first foray into the tablet industry, quickly selling millions of copies. The online retailer is looking to join the iPad in offering colorful, interactive and multimedia e-books.







Jobs reportedly communicated to publishing executives last June that he had a vision to revolutionize the textbook industry with the iPad, but he unfortunately did not live to see it realized.



Apple on Thursday held a media event in New York City to announce several new e-book and education initiatives. The Cupertino, Calif., iPad maker released iBooks 2 with additional features for e-books. It also announced an iBooks Author tool that can create digital books to either sell on iBooks or distribute for free.











The company also succeeded in bringing the major publishers on board with its plan for interactive digital textbooks. iBooks 2 launched with several textbooks priced at $14.99 or less, a significant discount from traditional paper textbooks.

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Comments

  • Reply 1 of 103
    This is why we can't have nice things.



    I really hope the pricing never changes. I'm considering buying the ipad 3 (my first Apple product purchase since the iphone 3g) simply as an INVESTMENT if textbook prices remain that low.



    I really don't want this to be ruined.
  • Reply 2 of 103
    is it just high school text books that low, what about tertiary texts?



    Its all pointless anyway. I can not purchase any content from teh ibook store whether i want to or not.
  • Reply 3 of 103
    Lawyers looking for payday. Case dismissed.
  • Reply 4 of 103
    I wonder if these lawyers have considered that Apple could have made no conditions about pricing etc and most of the major publishers would have jumped ship from Amazon as soon as they could for the vendor that lets them set the price.
  • Reply 5 of 103
    *looks at Kindle image*



    No, what? That was an actual Kindle? No, that's just a prototype. They didn't actually?



    They released something that looked that hideous? That THING was not just SHOWN to the public, but SOLD?!



    THAT. THAT THING.



    How did I miss that?!
  • Reply 6 of 103
    Quote:
    Originally Posted by Tallest Skil View Post


    *looks at Kindle image*



    No, what? That was an actual Kindle? No, that's just a prototype. They didn't actually?



    They released something that looked that hideous? That THING was not just SHOWN to the public, but SOLD?!



    THAT. THAT THING.



    How did I miss that?!



    You missed it because the entire industry laughed at it and dismissed it.
  • Reply 7 of 103
    solipsismxsolipsismx Posts: 19,566member
    <insert animated GIF of someone grasping at straws>
  • Reply 8 of 103
    daharderdaharder Posts: 1,580member
    Quote:
    Originally Posted by mdriftmeyer View Post


    You missed it because the entire industry laughed at it and dismissed it.



    Sure... If that's what you need to believe, but the FACT is that the Kindle 1 sold very well for its time, especially for a first generation device from a company not known for selling their own hardware.



    http://techcrunch.com/2008/08/01/we-...s-sold-240000/



    They topped Amazon's sales charts numerous times, and we're often sold out during that first year, and continue to sell extremely well today.



  • Reply 9 of 103
    shompashompa Posts: 340member
    It wasn't the low prices on Amazon ebooks that drove publishers mad. It was the cracy 70-30 split of revenue. Amazon 70% and publishers 30%. This is the reason why many ebooks are more expensive then retail books.
  • Reply 10 of 103
    shompashompa Posts: 340member
    Quote:
    Originally Posted by DaHarder View Post


    Sure... If that's what you need to believe, but the FACT is that the Kindle 1 sold very well for its time, especially for a first generation device from a company not known for selling their own hardware.



    http://techcrunch.com/2008/08/01/we-...s-sold-240000/



    They topped Amazon's sales charts numerous times, and we're often sold out during that first year, and continue to sell extremely well today.







    189K sold devices in a year is good?

    Ipad1 sold more in the first hour.
  • Reply 11 of 103
    daharderdaharder Posts: 1,580member
    Quote:
    Originally Posted by shompa View Post


    189K sold devices in a year is good?

    Ipad1 sold more in the first hour.



    It was a much different time in the gadget-sphere, and those numbers were quite good for said time.
  • Reply 12 of 103
    solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by DaHarder View Post


    It was a much different time in the gadget-sphere, and those numbers were quite good for said time.



    Fine, the original iPhone that predates the Kindle and started at price higher than the Kindle sold 50% more units in the first two days than the Kindle all year.
  • Reply 13 of 103
    daharderdaharder Posts: 1,580member
    Quote:
    Originally Posted by SolipsismX View Post


    Fine, the original iPhone that predates the Kindle and started at price higher than the Kindle sold 50% more units in the first two days than the Kindle all year.



    So... \
  • Reply 14 of 103
    Quote:
    Originally Posted by DaHarder View Post


    So... \



    Denial is a River you're drowning in.
  • Reply 15 of 103
    solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by DaHarder View Post


    So... \



    You said "It was a much different time in the gadget-sphere, and those numbers were quite good for said time." yet you claim that time didn't include the 2010 iPad launch 2 years later so I included a launch pre-dates the Kindle. Now your claim is that 2007 doesn't count? I can show you the iPhone sales for 2008 but it hurts your argument even more and I've already destroyed plenty of your arguments tonight so I think I'll let others take over from here.
  • Reply 16 of 103
    Quote:
    Originally Posted by MaroonMushroom View Post


    This is why we can't have nice things.



    More than any other single characteristic, American culture is marked by an irrational, overweening sense of entitlement. Wherever did you people get the notion that you are entitled to nice things? It's particularly strange watching this play out as your for-hire government continues to work toward providing 95% of the wealth to 5% of the populace.



    The question of entitlement aside, the average American will shortly be the equivalent of Walmart employees who have only Walmart things. The entire nation is becoming the 21st century equivalent of a company town - one sweatshop, under God.
  • Reply 17 of 103
    solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by rbryanh View Post


    More than any other single characteristic, American culture is marked by an irrational, overweening sense of entitlement. Wherever did you people get the notion that you are entitled to nice things? It's particularly strange watching this play out as your for-hire government continues to work toward providing 95% of the wealth to 5% of the populace.



    The question of entitlement aside, the average American will shortly be the equivalent of Walmart employees who have only Walmart things. The entire nation is becoming the 21st century equivalent of a company town - one sweatshop, under God.



  • Reply 18 of 103
    Quote:
    Originally Posted by rbryanh View Post


    More than any other single characteristic, American culture is marked by an irrational, overweening sense of entitlement. Wherever did you people get the notion that you are entitled to nice things? It's particularly strange watching this play out as your for-hire government continues to work toward providing 95% of the wealth to 5% of the populace.



    The question of entitlement aside, the average American will shortly be the equivalent of Walmart employees who have only Walmart things. The entire nation is becoming the 21st century equivalent of a company town - one sweatshop, under God.



    Seriously, dude, take a [email protected]$#%&g breath.



    The "we can't have nice things" line you're responding to is an Internet meme, often invoked ironically to mock the very attitude you're trying to pin on your stereotype of Americans. I'd say if you crawl down off that high horse of yours a little more often and mingle with us common folk, you might have realized that instead of making a colossal ass of yourself with your holier-than-thou rant.
  • Reply 19 of 103
    Amazon were just as guilty in ensuring there was little competition.



    Remove the marketplace and consumers always have to pay the price you set.
  • Reply 20 of 103
    hill60hill60 Posts: 6,989member
    I hope these lawyers aren't expecting to be paid a percentage of any damages obtained under an "agency model".



    If I was defending the case it's a question I'd ask, along with an answer as to the reasons why.



    Then suggest they should only be able to be paid a set amount, such as that paid to public defenders.



    In a free market people can ask whatever price they want for what they produce..
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