This posting was written by John W. Arden.
Publishers Penguin, Simon & Schuster, and MacMillan have conspired with Apple, Inc. to fix the sales prices of electronic books, according to an antitrust lawsuit filed by 16 state attorneys general in the federal district court in Austin.
The publishers and Apple were charged with a horizontal conspiracy to raise e-book retail prices in violation of Sec. 1 of the Sherman Act and the antitrust laws of the 16 states. The complaint, filed today, seeks injunctive relief, an award of trebled damages, civil fines, and attorneys’ fess and costs.
The lawsuit was based on a two-year investigation into allegations that the defendants conspired to raise e-book prices. The investigation—led by the Texas Attorney General’s office and coordinated by the Connecticut Attorney General and the U.S. Department of Justice—revealed that Penguin, Simon & Schuster, and MacMillan conspired with other publishers and Apple to artificially raise prices by imposing a distribution model in which the publishers set prices for bestsellers at $12.99 and $14.99, according to the Texas Attorney General.
The complaint charges that when Apple entered the e-book market, the publishers and Apple agreed to adopt an agency distribution model—rather than the traditional wholesale distribution model—to allow them to fix prices. Because the publishers agreed to charge the same prices, retail price competition was eliminated and customers paid more than $100 million in overcharges.
Prior to filing suit, the states reached an agreement in principle with publishers Harper Collins and Hachette on issues of injunctive relief and consumer restitution.
Text of a news release on the lawsuit appears here on the Texas Attorney General’s website. The 56-page complaint in State of Texas v. Penguin Group (USA) Inc. appears here.