Amazon accused in class-action lawsuit of ebooks price fixing in collusion with publishers

By Emmanuel Legrand

Amazon has been accused of ebooks price fixing by colluding with the leading publishers in a class-action lawsuit filed in US District Court for the Southern District of New York. The suit alleges that Amazon has been artificially inflating the retail price of e-books through anticompetitive agreements with the nation’s five largest book publishers, according to law firm Hagens Berman, which initiated the legal proceedings. In addition, the state of Connecticut has started an investigation into Amazon's digital books market for potential anti-competitive behaviour.

  The lawsuit accuses Amazon of violating antitrust and consumer-protection laws. Plaintiffs seek monetary reimbursement for consumers who purchased e-books through e-book retailers that compete with Amazon, and also seek injunctive relief that would require Amazon and its co-conspirators to stop enforcing anti-competitive price restraints.

  The lawsuit refers to the publishers as the "Big Five" – Hachette, HarperCollins, Macmillan, Penguin-Random House and Simon & Schuster (the ViacomCBS company was acquired at the end of last year by Bertelsmann, parent company of Penguin-Random House) – that are named in the suit as "co-conspirators" but not as co-defendants.

Fix and raise the price of ebooks

  According to Hagens Berman, Amazon, which controls approximately 90% of the US e-book market, has "colluded" with the leading book publishers "to fix the price of e-books and raise the price of e-books sold through Amazon’s e-book retailer competitors higher than they would be in a legitimately competitive marketplace."

  The suit reads: “In violation of Section 1 of the Sherman Antitrust Act, Defendant and the Big Five Co-conspirators agreed to various anti-competitive MFNs and anti-competitive provisions that functioned the same as MFNs [Most favoured clauses]. Amazon’s agreement with its Co-conspirators is an unreasonable restraint of trade that prevents competitive pricing and causes Plaintiffs and other consumers to overpay when they purchase e-books from the Big Five through an eBook retailer that competes with Amazon. That harm persists and will not abate unless Amazon and the Big Five are stopped.”

  Hagens Berman is the law firm that filed a lawsuit in 2011 against Apple and the same major publishers, accusing them of selling their e-books at the same inflated prices through Apple’s online store as through all other e-book retailers.

Anticompetitive role

  At the heart of the case was the agreements publishers made with Apple, which included a most favored nations clause (MFN) to prevent retailer discounts, and by switching from a wholesale model, where the e-book retailer sets retail prices, to an agency model, where the publisher determines retail prices and the e-book retailer acts as its agent. The case was settled by Apple for $400 million and by the publishers for an undisclosed amount.

  Hagens Berman said in a statement that "Amazon’s co-conspirators" have "apparently failed to learn anything from the experience," and that Amazon "has stepped into the anticompetitive role once occupied by Apple, and its monopolistic actions have been condemned by US and European regulators."

  “Amazon’s behavior is astonishingly brazen, especially in light of past litigation and recent government actions in the U.S. and abroad,” said Steve Berman (pictured, below), managing partner of Hagens Berman. “Time and again, Amazon’s response to competition is not to compete on a level playing field, but to try to eliminate the competition – and that’s not how things are supposed to work.”

  The lawsuit alleges that Amazon and the publishers entered into price-fixing agreements in 2015, a move that resulted in e-book prices rising by up to 30%. "As a result of this alleged collusion, the plaintiffs all share a similar experience: When they shopped around for better prices on a given e-book title, they instead found uniform, anticompetitive pricing across the internet," said Hagens Berman.

Abuse of power

  “Amazon’s abuse of power proves, yet again, that when it comes to violating antitrust laws, the New Economy is up to the same old tricks,” said Berman.  

  Amazon and the publishers declined to comment.