On today's episode of The Daily Lawsuit: law firm Hagens Berman has filed a class action lawsuit against Apple and five of the major book publishing houses. The suit claims Apple and these publishers have conspired to raise prices on ebooks.
According to the suit, Amazon's loss-leading pricing for ebooks, designed to drive sales of its Kindle e-reader device, may have led to consumers having an established expectation of low ebook pricing. Allegedly, Apple and the major publishers named in the suit have colluded to raise ebook prices significantly over Amazon's lower prices under the so-called agency model.
Under the agency model, ebooks are sold directly to consumers (rather than being sold to retailers as under the old model), with retailers splitting revenues from sales. In the case of Apple's iBookstore, Apple's cut is the same as for most of its other online services: 30 percent.
The suit alleges that Apple's pushing of the agency model has meant that competitors like Amazon are now unable to price ebooks lower than Apple's set prices, which has resulted in driving the price of ebooks higher than ever before -- in some cases, electronic media is more expensive than traditional printed copies. We've looked at iBookstore pricing before, but the situation in 2010 didn't seem to reflect what's described in this suit. The price of ebooks certainly isn't higher than the cost of printed copies in many non-US countries, either; in New Zealand, I could buy three ebooks off the US iBookstore for the cost of one trade paperback from a brick-and-mortar retailer. That pricing situation is the same or worse in the UK and Australia.
According to Hagens Berman, "The lawsuit seeks damages for the purchase of e-books, an injunction against pricing e-books with the agency model and forfeiture of the illegal profits received by the defendants as a result of their anticompetitive conduct, which could total tens of millions of dollars." Well, good luck with that; from what we've been seeing so far, the iBookstore hasn't exactly been a smashing success.