DOJ to Sue Apple & e-Book Publishers for Price-Fixing

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Did Apple conspire with major e-book publishers to drive up the prices of e-books? That’s the word from the U.S. Department of Justice, which just announced it has warned Apple and five major U.S. publishers that it plans to sue them in an antitrust lawsuit for conspiring to fix and raise the prices of electronic books.

The DOJ lawsuit will mirror multiple class action lawsuits filed last year on behalf of e-book customers.

U.S. and European officials have been investigating whether U.S. publishers and Apple acted together to block out rivals such as Amazon from offering cheaper e-books. Price-fixing agreements designed to shut out competitors or force consumers to pay higher prices are forbidden under antitrust law.

According to the DOJ, Apple and five major U.S. publishers — Simon & Schuster, Hachette Book Group, Penguin Group, Macmillan, and HarperCollins — adopted an “agency model” in 2010 that allowed publishers to set the price of e-books and, in turn, allowed Apple to take a 30-percent cut. The model was adopted around the time that Apple launched the iPad, and the agreement effectively barred publishers from allowing rival retailers to sell the same books offered on the iPad at lower prices.

The new model capsized the “wholesale model” that competitors like Amazon and Barnes & Noble used, which allowed retailers to pay publishers for the e-book and charge consumers what they like. Amazon, which got a head start in the e-book market over Apple with its Kindle e-reader, had used the wholesale model to generally charge $9.99 for its e-books.

Multiple class action lawsuits were filed last year over the same charges, including Petru v. Apple, Inc., which the Plaintiff’s attorney says was prompted after a sudden increase in the price of e-books that was not matched by any cost increases.

Petru’s attorney said the Apple e-book antitrust class action lawsuit was about “a radical industry shift that simultaneously resulted in a 30 to 40 percent price increase across the industry overnight.”

The case is seeking damages on behalf of anyone who purchased an e-book published by one of the major publisher defendants after they adopted the agency model in 2010.

The Apple E-Book Antitrust Class Action Lawsuit case is Anthony Petru v. Apple, Inc., et al., Case No. 11-cv-03892, U.S. District Court, Northern District of California.

UPDATE 3: Apple Inc. announced June 16, 2014, that it had reached an undisclosed class action lawsuit settlement in the e-book antitrust litigation. 

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