Apple, Publishers Face New Conspiracy Claim
(CN) - A price-fixing conspiracy among Apple and five leading publishers put an independent ebook store out of business, BooksOnBoard claims in court, echoing a lawsuit brought by the government nearly two years ago.
Abbey House Media Inc., an ebook retailer formerly doing business as BooksOnBoard, sued Apple, Hachette, HarperCollins, Verlagsgruppe Georg Von Holtzbrinck GmbH, Holtzbrinck Publishers (Macmillan), The Penguin Group and Simon & Schuster in federal court in Manhattan on Friday.
BooksOnBoard claims Apple conspired with the publishers "to fix prices and reduce competition" in the burgeoning e-book market in order.
Fearing that Amazon's $9.99 price point for e-books would "disrupt" the industry, the publishers "agreed to act collectively to force up Amazon's retail prices," according to the lawsuit.
Their CEOs allegedly met behind closed doors once per quarter between September 2008 and September 2009 to discuss how they could solve the so-called "$9.99 problem." They saw the perfect opportunity when Apple announced plans to enter the e-book industry, BooksOnBoard claims.
Each publisher signed an e-book distribution agreement with Apple that took effect on April 3, 2010 -- the day Apple released its iPad.
Under these agreements, publishers could raise the price of new and bestselling e-books to $12.99 or $14.99, and Apple would get a 30 percent commission on each e-book sale.
The publishers then forced other e-book retailers to accept the same agency model if they wanted to sell their books, BooksOnBoard says.
BooksOnBoard claims it was the largest independent e-book store in the United States, with revenue behind only Amazon and Barnes & Noble, before the price-fixing conspiracy took effect in 2010.
Without a dedicated e-reader such as the Kindle or Nook, BooksOnBoard had relied on aggressive pricing and its large e-book catalog to sell e-books. It also partnered with companies that made apps for Apple's operating system.
"Once Apple and the publisher defendants entered into their price-fixing agreement, however, BooksOnBoard was no longer able to offer its favorable pricing," the lawsuit states. "After years of steady growth, in April 2010 -- right after the imposition of agency -- BooksOnBoard quickly went under for all intents and purposes."
Apple also demanded a 30 percent cut on all e-books sold via its app store, an amount BooksOnBoard calls "uneconomic and non-competitive because the agency agreements allowed for only 30 percent margins on sales of e-books."
The company notes that the conspiracy alleged in its complaint "is identical in virtually all respects to the one proven by the DOJ."
The Department of Justice sued Apple and the publishers in April 2012. The publishers settled with the government before trial, but Apple lost in a bench trial in June 2013.
"Apple and the publisher defendants shared one overarching interest -- that there be no price competition at the retail level," U.S. District Judge Denise Cote wrote in her 160-page ruling. "Apple did not want to compete with Amazon (or any other e-book retailer) on price; and the publisher defendants wanted to end Amazon's $9.99 pricing and increase significantly the prevailing price point for e-books." (Parentheses in original.)
The publishers and Apple faced a similar lawsuit brought by the attorneys general of 54 states, U.S. territories and the District of Columbia in April 2012, and were hit with a federal class action in 2011.
Hachette, HarperCollins and Simon & Schuster agreed to pay $69 million to settle the states' claims.
In the latest lawsuit, BooksOnBoard accuses Apple and the publishers of violating the Sherman Act and a New York business law known as the Donnelly Act.
It represented by Eric Creizman of Manhattan.