Apple Under Pressure Over eBook Price Fixing

The law firm that accused Apple of conspiring to fix the prices of electronic books has made new allegations, offering quotes from key Apple executives, including former Apple boss Steve Jobs, as evidence of collusion.

Hagens Berman has filed a class action suit on behalf of everyone who bought an electronic book during a particular period, alleging that Apple offered two different pricing systems: a 'traditional' and an 'agency' model.

The traditional model originated with Amazon for its Kindle books, and copies pricing for printed books: the publisher charges retailers a fixed price, leaving the retailer to decide how much to charge customers.

This allows retailers to increase sales by taking a smaller profit, or even selling at a loss in order to draw visitors to their site or, in Amazon's case, make its hardware more attractive.

Agency Model Leaves Power In Publisher's Hands

The agency model, however, lets publishers decide how much customers must pay for a book, and gives the retailer a fixed 30 per cent of this revenue. The remaining 70 per cent goes to the publisher. Coincidentally, this is the same pricing structure Apple uses for both music and iPhone applications.

According to publishers, the agency model prevents companies from selling at tiny profits or even losses, and thus squeezing smaller retailers out of the market. (Source: societyofauthors.net)

Alleged Collusion Forces Up Book Prices

According to the lawsuit, Apple worked together with five of the six largest publishing groups to use the agency model.

Critics say the collusion forced ebook prices up by 30 to 50 per cent. They point to the fact that some major new titles cost the same in electronic and printed form, despite ebooks enjoying far lower production costs.

The lawsuit was further revised this week to include more evidence said to support the claim that publishers schemed with Apple to switch to the agency model just when Apple launched the iPad and began selling electronic books directly.

Allegedly, the publishers then joined together in telling Amazon that if it didn't agree to buy books under the agency pricing model, they would all refuse to sell it their books. This would have given Apple a huge advantage and would have made the Kindle much less attractive to users. (Source: publishersweekly.com)