Bootup: Apple Alleged Ringleader in eBook Price Fixing Conspiracy, Lawsuit Claims

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Today in technology: Apple Inc. faces a class action lawsuit claiming the company allegedly conspired with major book publishers to raise the price of eBooks, NASA issues its first private sector space flight contract and a mysterious face is caught on YouTube in the clouds over New Brunswick.

Is Apple making eBooks more expensive?
The same day Apple Inc. surpassed Exxon Mobil Corp. as the world’s most valuable company, the freshly crowned King of capital markets was slapped with a class action lawsuit claiming it was abusing its dominant market position.

In a 44-page complaint filed in U.S. District Court of Northern California on Tuesday, Seattle-based firm Hagens Berman Sobol Shapiro argues the iPad maker illegally conspired with five major book publishers to fix the price of eBooks. The goal, according to a subsequently issued press release from Hagens Berman, was to “neutralize” the competitive threat of Inc.’s Kindle eBook reader prior to the introduction of the first iPad last year.

Simon & Schuster Inc., HarperCollins Publishers, Hachette Book Group, Macmillan Publishers and Penguin Group Inc. are all named as parties to the price fixing scheme. Because those five companies control about 85% of the most popular fiction and non-fiction titles, the complaint argues, they feared Amazon’s original eBook pricing structure of about US$9.99 per title would permanently lower consumer expectations for the cost of eBooks as well as eBook readers.

“Fortunately for the publishers, they had a co-conspirator as terrified as they were over Amazon’s popularity and pricing structure,” Steve Berman, founding partner with Hagen Berman, said in a statement.

“And that was Apple.”

“We intend to prove that Apple needed a way to neutralize Amazon’s Kindle before its popularity could challenge the upcoming introduction of the iPad, a device Apple intended to compete as an e-reader.”

Once Apple had established its own iBookstore to compete with Amazon, the lawsuit claims the Cupertino, Calif.-based company convinced publishers to adopt its own 70/30 revenue split model and raise prices accordingly for both sides to maintain profitability. Should Amazon refuse to accept higher prices, the publishers allegedly denied the retailer access to their titles.

Mr. Berman notes the price of many popular eBook titles such as The Kite Runner quickly became more expensive than their dead tree-based counterparts as a result of the purported conspiracy.

“Apple simply did not want to enter the e-book marketplace amid the fierce competition it knew it would face from Amazon and its discounted pricing,” Mr. Berman said.

“So instead of finding a way to out-compete Amazon, they decided to choke off competition through this anti-consumer scheme.”

The case has two plaintiffs so far and Hagens Berman is actively seeking others who have purchased costly eBooks in recent months to join as well. John Simpson of U.S. advocacy group Consumer Watchdog told Computerworld on Wednesday the plaintiff’s appear to have a “very strong case.”

“I have long been concerned about the apparent monopoly power Apple has been able to exercise through its Apps Store,” he said.

Long considered to be the only worthy challenger to Apple in the tablet market, Amazon is expected to launch its own touchscreen iPad competitor in the fall. If the claims of price-fixing are proven in court, those actions would be in violation of several anti-trust laws at the state and federal levels.

Apple declined to comment on the lawsuit.

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