Amazon, Apple Accused of Price-Fixing E-Books

Amazon, Apple Accused of Price-Fixing E-Books

Digital booksellers and publishers have been accused of fixing prices on e-books part of an expanding, legal backlash from customers seeking lower-priced digital downloads.

Fifteen companies, including book giants Barnes & Noble and Amazon, were named this week in lawsuits. They join Apple and five other publishers, who were named in an initial price-fixing lawsuit in August.

The lawsuit, if successful, could bring e-book prices back to lower levels. About 15 percent of all book sales are through digital sales, which are growing faster than print sales, causing publishers to lose money and some print stores, such as Borders, to go out of business.

The argument against the companies centers on “agency pricing,” which occurs when publishers set prices for digital books that apply to all retailers, with the retailer receiving commissions from the publishers.

Hachette, HarperCollins, Simon & Schuster, Macmillan and Penguin all adopted agency pricing in January 2010 as part of negotiations with Apple before it launched the iPad, leading to customers’ complaints that the negotiations also allowed the companies to fix prices.

Agency pricing is different from “wholesale publishing,” in which the retailer sets the prices for e-books against a list price set by the publisher, a practice publishers and authors both say doesn’t pay them a fair price for their efforts, since retailers can choose to sell e-books for a loss to drive up sales. Also, publishers are concerned that low digital prices, plus the predominance of smartphones, tablets and e-readers such as Kindle, cut into the sales of print book copies, and believe specifying prices helps them recoup some of those costs.

For several years Amazon sold books through wholesale publishing, allowing it to keep book prices low and leading customers to become accustomed to buying many books under $10. However, since the company shifted to the agency model, customers now complain it and the other companies are making digital book prices too high as well.

Many readers believe e-books should cost less, because they don’t involve printing costs, but publishers respond they’re losing money through downloads. E-books now account for at least 15 percent of revenues for most big book publishers, and digital sales are growing much faster than print sales, making the issue directly relevant to the growth of e-publishing.

The publishers also argue that a book still costs a great deal to put out, when other factors besides just the printing are considered. They say that they need compensated for cover design, editing, marketing and more, costs that remain even if books are being downloaded.

The lawsuits are separate for now, but lawyers for the publishers may want them all combined so they can mount a singular defense, setting the stage for interesting legal wrangling to come.

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