Apple Accused in Suit of E-Book Price Fixing With Publishers

Apple Inc. (AAPL), in connection with last year’s introduction of the iPad, colluded with News Corp. (NWSA)’s HarperCollins Publishers unit and four other publishers to fix prices of electronic books, according to a lawsuit.

Apple, threatened by Amazon.com Inc. (AMZN)’s Kindle e-book reader and its potential to distribute other digital media, agreed with the publishers on or before January 2010 to announce a so-called agency model to “force the e-book sales model to be entirely restructured,” according to the complaint filed yesterday in federal court in Oakland, California.

The traditional “brick-and-mortar” publishers agreed to the price-fixing because they were threatened by Amazon’s “pro- consumer” e-book titles priced at $9.99, according to the suit.

“Fortunately for the publishers, they had a co-conspirator as terrified as they were over Amazon’s popularity and pricing structure, and that was Apple,” Steve Berman, an attorney representing consumers in the case, said in an e-mailed statement.

“We intend to prove that Apple needed a way to neutralize Amazon’s Kindle before its popularity could challenge the upcoming introduction of the iPad, a device Apple intended to compete as an e-reader,” Berman said in the statement. Berman seeks to represent all e-book consumers in the complaint.

‘Restrained Trade’

The publishers and Cupertino, California-based Apple thwarted the discounting of e-books and “restrained trade by coordinating their pricing to directly set retail prices higher than had existed in the previously competitive market,” according to the complaint.

A representative of Apple didn’t immediately return phone and e-mail messages seeking comment after regular business hours yesterday. Tina Andreadis, a HarperCollins spokeswoman, also didn’t immediately return a call seeking comment after regular business hours.

The other publishers named as defendants in the suit are Hachette Livre SA’s Hachette Book Group unit, U.K.-based MacMillan Publishers Ltd., Pearson PLC (PSON)’s Penguin Group and CBS Corp.’s Simon & Schuster.

The case is Petru v. Apple Inc., 11-03892, U.S. District Court, Northern District of California (Oakland).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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