Apple, publishers sued over e-book pricing as sales jump

Apple and five of the six largest publishing houses have been sued in a class action suit accusing them of illegal price fixing via the agency model, while a new survey shows e-book sales have risen by more than 1000 percent over the past two years.

Seattle-based law firm Hagens Berman filed a class action law suit against Apple, Hachette, Simon & Schuster, Macmillan, HarperCollins and Penguin on Thursday, PaidContent reports. The companies are accused of conspiring to adopt the agency model in order to “boost profits and force e-book rival Amazon to abandon its pro-consumer discount pricing."

Random House, the only "big 6" publisher not included in the suit, resisted the agency model at first, though it has since adopted it. The publisher began offering its books for sale on the iBookstore in March of this year.

The agency model allows publishers to set their own pricing while providing the seller with a portion of the revenue. Apple pushed to adopt the model for its iBookstore, which launched last year alongside the iPad. The company currently receives the same 30 percent cut that it first offered to developers selling software on the App Store.

According to the law suit, Amazon's Kindle had "the potential to massively reduce distribution costs historically associated with brick-and-mortar publishing." However, publishers were allegedly threatened by the new business model and sought to coordinate their activities with Apple in an effort to "restrain trade and retard innovation."

"Being hidebound and lacking innovation for decades, the publishers were particularly concerned that Amazon’s pro-consumer pricing of eBooks would negatively impact their moribund sales model, and in particular the sale of higher priced physical copies of books,” the complaint read.

The suit goes on to claim that “Apple facilitated changing the eBook pricing model and conspired with the Publisher Defendants to do so” because “the Kindle was (and is) a competitive threat to Apple’s business model.”

The complaint alleges that publishers announced the transition to the agency model for e-book sales to coincide with the release of the iPad. The fact that the publishers allowed Apple to use their trademarks in connection with the unveiling of the iPad and iBooks is put forth as evidence of the alleged collusion.

"As a direct result of this anticompetitive conduct as intended by the conspiracy, the price of eBooks has soared. The price of new bestselling eBooks increased to an average of $12 - $15—an increase of 33 to 50 percent," the filing continued.

Anthony Petru and Marcus Mathis are listed as plaintiffs in the case.

Last year, Connecticut Attorney General Richard Blumenthal conducted a review of e-book pricing over concerns that matching pricing on Apple's iBooks and Amazon's Kindle platforms reflected anticompetitive deals.

The dispute comes as the e-book industry appears set for explosive growth. According to the new BookStats survey, e-book revenue for trade publishers jumped up by 1274 percent since 2008, reaching $878 million in 2010. E-book net sales increased to 114 million last year, up 1039.6 percent since 2008.

In 2010, e-books grabbed 6.4 percent of the trade book market, up from just 0.6 percent in 2008. Digital books have performed especially well in the adult fiction category, where they held a 13.6 percent revenue share in 2010.

BookStats is published cooperatively by the Association of American Publishers and the Book Industry Study Group. The report includes data from close to 2,000 U.S. publishers. Though the survey only released numbers for 2010, e-books are expected to see even further success throughout this year.