The “agency model” – a business strategy to protect the value of publishers’ content – has been challenged in a class action complaint filed Aug. 9 in the U.S. District Court, Northern District of California, by Seattle law firm Hagens Berman.
The suit alleges that Apple, its CEO Steve Jobs, and five publishers conspired to control e-book prices, some of which now are higher than hardcover book prices. The conspiracy was designed to thwart Amazon.com’s e-book market dominance, driven by its policies to sell e-books at or below cost to gain market share.
The suit contends that publisher agreements with Apple allowed the company to force publishers to discount e-book prices on bestsellers below certain minimum ranges “to compete with brick-and-mortar bookstores and competing online sites.”
The publishers – called the Agency 5 in the suit – are Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster. No Christian-publishing divisions or imprints are named in the suit as others are.
Random House was forced in March to “join the cartel [Apple] had helped to create to raise prices” because Apple banned the publisher’s titles from its online e-book store, according to the lawsuit.
Publishers are positioned in the litigation as forcing Amazon.com to adopt the agency model with help from Apple, even though Amazon had controlled 90% of the e-book market at the time and was taking market share by undervaluing content.
Apple and the named publishers colluded to increase prices to boost profits and force e-book rival Amazon “to abandon its pro-consumer discount pricing.”
The suit contends the agency model is unfriendly to consumers, and points out European, Texas, and Connecticut antitrust regulators are investigating the publishers and the agency model.
The suit seeks a jury trial and various claims for damages and attorney fees.