Court: U.S. District Court
Location: California
Ticker Symbol: NASDAQ:AAPL
Hagens Berman has filed a nationwide class-action lawsuit claiming that Apple Inc. and five of the nation’s top publishers, including HarperCollins Publishers, Hachette Book Group, Macmillan Publishers, Penguin Group Inc. and Simon & Schuster Inc. illegally fix prices of electronic books, also known as e-books.
Filed in the U.S. District Court for the Northern District of California, the lawsuit 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 suit, publishers believed that Amazon’s wildly popular Kindle e-reader device and the company’s discounted pricing for e-books would increase the adoption of e-books, and feared Amazon’s discounted pricing structure would permanently set consumer expectations for lower prices, even for other e-reader devices.
The firm believes that Apple was involved in the scheme. The complaint alleges that Apple believed that it needed to neutralize the Kindle when it entered the e-book market with its own e-reader, the iPad, and feared that one day the Kindle might challenge the iPad by digitally distributing other media like music and movies.
The complaint claims that the five publishing houses forced Amazon to abandon its discount pricing and adhere to a new agency model, in which publishers set prices. This would prevent retailers such as Amazon from offering lower prices on e-books.
Apple had already established such a model on its App store, taking 30 percent revenue on sales while the publishers receive 70 percent.
If Amazon defied the publishers and tried to sell e-books below the publisher-set levels, the publishers would simply deny Amazon access to the title, the complaint details. The defendant publishers control 85 percent of the most popular fiction and non-fiction titles.
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 their 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.
According to the complaint, the prices of e-books have risen as much as 50 percent since the switch to an agency model.
The lawsuit claims Apple and the publishers are in violation of a variety of federal and state antitrust laws, the Sherman Act, the Cartwright Act and the Unfair Competition Act.
The named plaintiffs, Anthony Petru, a resident of Oakland, California, and Marcus Mathis, a resident of Natchez, Mississippi, each purchased a least one e-book at a price above $9.99 after the adoption of the agency pricing model.
Once approved, the lawsuit would represent any purchaser of an e-book published by a major publisher after the adoption of the agency model by that publisher.
The lawsuit 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.
Potential plaintiffs can contact the firm by clicking here.
Updates:
May 15, 2012: United States District Judge Denise Cote has issued the first substantive ruling in the case, rejecting Apple and the publishers’ motion to dismiss. The judge’s order can be read here.
Dec. 20, 2011: The Court today appointed Hagens Berman lead counsel in the case.
Key Attorneys
Mr. Berman co-founded the firm in 1993, and is the managing partner. He is considered one of the most succe... link >>
Mr. Friedman is a former federal prosecutor and currently a partner in Hagens Berman’s San Francisco office, where he specializes in class actions against some of the largest companies in the United States. He litigates cases involving antitrust violations, securities fraud, and consumer protection matters.
Mr. Friedman’s antitrust practice includes litigation against technology companies and cutting-edge competition policy issues. Mr. Friedman is part of our team of lawyers in the following cases in which Hagens Berman is lead or co-lead counsel:
- In re Electronic Books Antitrust Litig., No. 11-md-02293 (DLC) (S.D.N.Y.): A nationwide class of eBook consumers allege five of the largest book publishers in the United States and Apple conspired to raise the prices of eBooks and restrain competition.
- In re Optical Disk Drive Prods. Antitrust Litig., No. 3:10-md-2143 RS (N.D. Cal.): An action on behalf of consumers in more than two dozen states against the manufacturers of optical disk drives, the plaintiffs allege defendants conspired to increase the price of ODDs that were sold to original equipment manufacturers. Defendants’ conduct allegedly caused millions of consumer electronics products, such as computers, to be sold at illegally inflated prices.
- Pecover et al. v. Electronic Arts Inc., No. 3:08-cv-02820-CW (N.D. Cal.): A nationwide certified class of consumers who bought interactive football video games. Plaintiffs allege Electronic Arts entered into a series of exclusive licenses with football intellectual property owners, such as the NFL, in order to lock-up the market. This resulted in increased prices, lower quality games, and reduced consumer choice.
Mr. Friedman has also been extensively involved in the firm’s representation of government entities, successfully recovering hundreds of millions of dollars for these cash-strapped entities. A recent series of cases include government entities seeking to recover monies wrongfully paid due to a scheme McKesson Corp. perpetrated. These cases include:
- San Francisco Health Plan v. McKesson Corp., No. 1:08-CV-10843-PBS (D. Mass.); State of Utah v. McKesson Corp., No. CV 10-04743 SI (N.D. Cal.); The Commonwealth of Virginia v. McKesson Corp. et al., No. CV-11-02782 SI (N.D. Cal.); State of Oregon v. McKesson Corp., No. CV-11-5384-SI (N.D. Cal.).
From 1997-2000, Mr. Friedman was an Assistant United States Attorney in the Criminal Division of the United States Attorney's Office for the Central District of California (Los Angeles). As an AUSA, Mr. Friedman tried numerous federal cases and prosecuted matters involving investor, bank, and real estate fraud, tax evasion, narcotics trafficking, and money laundering. Prior to joining the U.S. Attorney's office, Mr. Friedman clerked for the Honorable Manuel L. Real, United States District Court Judge, Central District of California.
Mr. Friedman graduated with a B.A. degree in political science from the University of Washington in 1991, where he was a member of the varsity baseball team. Mr. Friedman obtained his J.D., magna cum laude, from Santa Clara University School of Law in 1994, where he was on the Dean's list, an Emery School of Law Merit Scholarship Recipient, and a research assistant to the Dean of the law school. He is licensed to practice law in California and admitted in the Central and Northern Districts and the United States Court of Appeals for the Ninth Circuit.
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