Judge OKs Class-Action eBook Price-Fixing Suit

Contributing Writer

Judge Denise Cote of US District Court in New York has given the green light for a class-action lawsuit to proceed against Apple and six book publishers that have been accused of price-fixing eBooks.

The suit was filed back in August 2011 and is separate from the suit filed by the Department of Justice last month which made similar accusations. In fear of Amazon dominating the eBook sector, Apple and the publishers allegedly conspired to assume a pricing plan -- AKA the Agency Model -- that allowed the publishers to set the price while Apple received a 30-percent cut. Apple reportedly said it would only agree to the price structure if the publishers enforced the new plan on other retailers like Amazon and Barnes & Noble, thus snuffing out competition.

After reviewing the evidence, Judge Cote said that the agreement between Apple and the book publishers just before the launch of the iPad tablet "is unlawful per se because it is, at root, a horizontal price restraint." This of course is her opinion, and a final ruling won't be made until both sides of the case are presented to a jury.

"There are ample allegations that Apple became an integral member of this conspiracy and well understood that the upshot of its participation would be the elimination of price competition at the retail level, forcing consumers to... 'pay a little more' for ebooks," the judge wrote.

The publishers named in the lawsuit include HarperCollins, Simon & Schuster, Hachette Book Group, Macmillan, Penguin and Random House. Three publishers already settled with the Department of Justice due to the impending expense. Others have decided to stand their ground alongside Apple.

As stated back in April, documents filed in the government's case suggested that former Apple CEO and late Steve Jobs played a key role in the "conspiracy." One piece of evidence is an email Jobs sent to one publisher, saying "Hold back your books from Amazon" and "Throw in with Apple and see if we can all make a go of this to create a real mainstream ebooks market at $12.99 and $14.99."

In retaliation, Apple said that the accusations made by the Department of Justice were untrue. "The launch of the iBookstore in 2010 fostered innovation and competition, breaking Amazon's monopolistic grip on the publishing industry. Since then, customers have benefited from eBooks that are more interactive and engaging. Just as we've allowed developers to set prices on the App Store, publishers set prices on the iBookstore."

Judge Denise Cote apparently thinks differently, allowing the class-action lawsuit to proceed. Canada is also going after Apple and five book publishers over eBook price fixing. The lawsuit was filed in Quebec Superior Court by lawyer Normand Painchaud last February. Like those filed here in the States, his class-action suit claims that Apple colluded with the book publishers to raise ebook prices in order to topple Amazon's dominance. Same story, different territory.