Colo. AG joins multistate anti-trust suit against publishers, Apple

The Colorado attorney general, John Suthers, has joined a multi-state lawsuit against publishers and Apple on suspicion that they engaged in price fixing and other anti-competitive practices in the market for electronic books.

The publishers named in the suit are Penguin Group, Macmillan Holdings, Simon & Schuster, Simon & Schuster Digital Sales.

The antitrust suit was filed in U.S. District Court for the Western District of Texas and stems from a two-year investigation led by the Texas attorney general and coordinated with the Connecticut attorney general and the U.S. Justic Department. The lawsuit alleges that the defendants conspired to raise e-book prices. For years, retailers sold e-books through a traditional wholesale distribution model, under which retailers – not publishers – set e-books’ sale prices.

However, the investigation revealed that the publishers conspired with Apple and other publishers to artificially raise prices by imposing a distribution model in which the publishers set the prices for bestsellers at $12.99 and $14.99.

When Apple prepared to enter the e-book market, the publishers and Apple agreed to adopt an agency distribution model as a mechanism to allow them to fix prices. To enforce their price-fixing scheme, the publishers and Apple relied on contract terms that forced all e-book outlets to sell their products at the same price. Because the publishers agreed to use the same prices, retail price competition was eliminated. According to the lawsuit, the coordinated agreement to fix prices resulted in e-book customers paying more than $100 million in overcharges.

The antitrust lawsuit, filed by attorneys general from 15 states and Puerto Rico, seeks injunctive relief to reverse the effects of the defendants’ anticompetitive conduct as well as damages for customers who paid artificially inflated prices for e-books.

In addition to the lawsuit against Apple and the publishers, the multistate group has reached an agreement in principle with two other publishers, Hachette Book Group and HarperCollins Publishers. They have agreed to provide significant consumer restitution and injunctive relief.