Apple and US publishers face agency lawsuit

Five US publishers and Apple have been named in a US lawsuit alleging the companies "illegally fix prices of electronic books" and that the five publishers "forced Amazon to abandon its discount pricing and adhere to a new agency model, in which publishers set prices".

US law firm Hagens Berman filed the suit in a San Francisco Federal Court against Apple, along with Hachette Book Group, HarperCollins, Macmillan, Penguin and Simon & Schuster, over the agency model of e-book pricing. The same firm is also investigating claims that several large e-book publishers are under-reporting the number of e-books sold, paying authors less than their share of royalties.

The named plaintiffs in the pricing suit, Anthony Petru, a resident of Oakland, California, and Marcus Mathis, a resident of Natchez, Mississippi, each purchased a least one e-book at a price above $9.99 after the adoption of the agency pricing model. Worryingly for publishers, the law firm claims that once approved, the lawsuit would represent any purchaser of an e-book published by a major publisher after the adoption of the agency model by that publisher, and has called for "potential plaintiffs" to get in touch via an online form.

The law firm said it believed Apple was involved in the scheme. In a statement it said: "The complaint alleges that Apple believed that it needed to neutralize the Kindle when it entered the e-book market with its own e-reader, the iPad, and feared that one day the Kindle might challenge the iPad by digitally distributing other media like music and movies." It alleges if Amazon had defied the publishers and tried to sell e-books below the publisher-set levels, the publishers "would simply deny Amazon access to the title". It also claims the defendant publishers control 85% of the most popular fiction and non-fiction titles.

Publishers Marketplace notes Hagens Berman is based in a town called Seattle, and the complaint lauds Amazon but demonstrates contempt for publishers' "inefficient and antiquated business model . . . being hidebound and lacking innovation for decades."

A day earlier the law firm had announced  it was investigating e-book royalty payments, claiming  the so-called “big six” e-book publishers may be using outdated accounting systems to track the sales of e-books. It said: "As a result, some authors have reported various accounting errors on their statements, including the under-reporting of sales of the e-books." It invites potential plaintiffs to contact the firm or "join this investigation".

Publishers and Apple declined to comment when commented by various strands of the media. The agency model is already the subject of numerous regulatory inquiries in the US, Europe, and the UK.