Colorado Attorney General John Suthers announced today that his office has joined a multistate lawsuit against several publishers and Apple, Inc. on suspicion that they engaged in price fixing and other anticompetitive practices in the market for electronic books.
Named in the lawsuit are Penguin Group (USA) Inc.; Macmillan Holdings; Simon & Schuster; Simon & Schuster Digital Sales, as well as Apple.
The lawsuit, filed in the U.S. District Court for the Western District of Texas, stems from a two-year investigation, led by the Texas Attorney General’s Office. The Texas AG’s office coordinated with the offices of the Connecticut Attorney General and the U.S. Justice Department into allegations that the defendants conspired to raise e-book prices, according to Suthers.
Simultaneously with the lawsuit filed by the states, the U.S. Justice Department filed an antitrust lawsuit in Manhattan against Apple and a number of book publishers.
The Justice Department said it had settled with three publishers – Hachette Book Group, HarperCollins Publishers and Simon & Schuster. However, it said it will continue to litigate against Apple, Macmillan and Penguin Group.
According to Suthers, for years, retailers sold e-books through a traditional wholesale distribution model, under which retailers – not publishers – set e-books’ sales prices.
But the investigation allegedly revealed that the publishers conspired with Apple and other publishers to artificially raise prices by imposing a distribution model in which the publishers set prices for best sellers at $12.99 and $14.99 .
The suit alleges that when Apple prepared to enter the e-book market, the publishers agreed to adopt an agency distribution model as a mechanism to allow them to fix prices.
To enforce their alleged price-fixing scheme, the publishers and Apple relied on contract terms that forced all e-book outlets to sell their products at the same price.
According to the lawsuit, the coordinated agreement to fix prices resulted in e-book customers allegedly paying more than $100 million in overcharges.
The antitrust lawsuit was filed by attorneys general from 15 states and Puerto Rico. It seeks injunctive relief to reverse the effects of the defendants’ allegedly anticompetitive conduct as well as damages for customers who allegedly paid the artificially inflated prices for e-books.
Suthers said that in addition to the lawsuit against Apple and the publishers, the multistate group has reached an agreement in principle with two other publishers, Hachette Book Group and HarperCollins Publishers. Suthers said they have agreed to provide significant consumer restitution and injunctive relief.
The federal lawsuit in Manhattan alleges the five publishers and Apple were unhappy that competition among e-book sellers had reduced e-book prices and the retail profit margins of the book sellers to levels they thought were too low.
Howard Pankratz: 303-954-1939 or hpankratz@denverpost.com
