New Allegations in E-books Price-fixing Lawsuit

Jan. 20, 2012

SAN FRANCISCO - Attorneys representing e-book purchasers in a case that claims five major publishers conspired with Apple (NASDAQ: AAPL) to fix the price of e-books today filed an updated complaint including new information and allegations.

The updated complaint names five of the nation's top publishers including HarperCollins Publishers, a subsidiary of News Corporation (NASDAQ: NWSA); Hachette Book Group; Macmillan Publishers; Penguin Group Inc., a subsidiary of Pearson PLC (NYSE: PSO), and Simon & Schuster Inc., a subsidiary of CBS (NYSE: CBS) as well as Apple (NASDAQ: AAPL), as defendants.

In the class-action lawsuit, consumers claim that the publishers feared Amazon's $9.99 pricing model to such a degree that they conspired with Apple to force Amazon to adopt a new agency model in which publishers set prices directly, effectively ending Amazon's ability to provide consumer-friendly pricing for e-books.

After the publishers unanimously and simultaneously adopted the new pricing model, the price of e-books shot up 30 percent, according to the complaint.

"The information we've included in this new filing shows the deep antagonism that publishers had toward Amazon for its consumer-friendly pricing," said Hagens Berman managing partner Steve W. Berman, who is lead counsel in 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 added that the fear and loathing of the competitive threat by Amazon led the publishers to take strident -- and illegal -- actions in an attempt to shore up their failing business model. "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."

The complaint cited a statement made by David Young, Chairman and CEO of Hatchett Book Group USA, who told The New Yorker, "If it's allowed to take hold in the consumer's mind that a book is worth ten bucks, to my mind its game over for this business."

The complaint also quotes Macmillan CEO John Sargent, who posted a blog claiming that the market was previously "fundamentally unbalanced" but that thanks to the agency model, it would now be "stable and rational."

According to the updated complaint, the publishers' fears were expressed by Arnaud Noury, chairman and CEO of Hatchett Livre SA in a meeting on Dec. 3, 2009, with an Amazon executive. In the meeting Noury allegedly suggested that if Amazon would agree to a $2.00 or $3.00 increase in the price of e-books, Hatchett and its competitors' fears would be allayed and the "industry" problem would be solved.

"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," said Berman.

The updated complaint also includes new information first exposed in Walter Isaacson's biography, Steve Jobs, including a passage in which Jobs explains that "Amazon screwed it up," causing Apple to suggest a transition to the agency model. Jobs also described Apple's request that no other retailer be allowed to sell e-books at a lower price than Apple. This "most favored nation" clause in Apple's agreements allowed it to avoid competing on price, according to the complaint.

"Steve Jobs saw the publishers' desperation and shrewdly coordinated a scheme that would benefit Apple and the publishers alike," said Berman.

The updated complaint provides new data to demonstrate the rise in the price of e-books following the adoption of the agency model. The data shows an average price increase of more than 30 percent, and 40 percent for new bestsellers. The complaint also demonstrates that some e-books now cost more than their print counterparts.

The lawsuit seeks 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 as a result of their anticompetitive conduct which could total tens of millions of dollars.

Hagens Berman invites potential plaintiffs to contact its office at ebooks@hbsslaw.com or by phone at 206-623-7292.

You can learn more about this case by visiting www.hbsslaw.com/ebooks.
 

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About Hagens Berman
Hagens Berman Sobol Shapiro LLP is a consumer-rights class-action law firm with offices in nine cities. The firm has been named to the National Law Journal’s Plaintiffs’ Hot List seven times. More about the law firm and its successes can be found at www.hbsslaw.com. Follow the firm for updates and news at @ClassActionLaw.

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