Apple Faces Class-Action Lawsuit for E-Book Price-Fixing

A law firm announced a nationwide class-action lawsuit claiming that Apple colluded with five of the nation's top publisher to illegally fix prices on electronic books.

Hagens Berman, a consumer rights class-action law firm, announced it filed the complaint in U.S. District Court for the Northern District of California which alleges that Apple, HarperCollins, Hatchette, Penguin, Simon & Schuster and MacMillan teamed up to force Amazon to raise its $9.99 e-book pricing to a more expensive "agency model," according to the release. Apple's interest was in keeping profit margins high and neutralizing Amazon's Kindle, attorney Steve Berman added.

"Fortunately for the publishers, they had a co-conspirator as terrified as they were over Amazon's popularity and pricing structure, and that was Apple," Berman, a founding partner of Hagen Berman said.

The complaint alleges that if Amazon didn't sell at approved prices -- around $12.99 to $14.99 -- the major publishers would deny Amazon access to the title. This led to some e-books selling at higher prices than paperbacks. Berman pointed out that The Kite Runner costs $12.99 as an e-book and only $8.82 as a paperback.

The lawsuit seeks damages for e-book purchases, an injunction against pricing e-books with the agency model and forfeiture of profits received by the defendants -- which could total tens of millions of dollars.

Both Publishers Weekly and the Seattle Times received no comment from either the five publishers or Apple. An Apple spokeswoman said the company would not comment on pending litigation.

We all know that Apple loves profits (especially 30 percent on anything sold in iTunes) but the question is if it's willing to get into bed with other companies to ensure those profits? Publishers would raise e-book prices to make e-retailers less attractive than brick-and-mortar bookstores -- a losing battle, but nonetheless an understandable one. But Apple's interest would be almost entirely profit-driven -- strangling Amazon's Kindle and keeping profit margins high. Strange, because at $9.99, e-books would likely be sold faster and accumulate profits just as, if not more, quickly.