Judge Denies Dismissal of E-Books Lawsuit Against Apple, Publishers

On Tuesday, a federal judge declined motions to dismiss a lawsuit filed by the U.S. Department of Justice that alleges Apple and major book publishers conspired to raise e-book prices, the Associated Press reports.
Apple and the publishers—Hachette, HarperCollins, Simon & Shuster, Macmillan, and Pearson’s Penguin Group—had asked that the suit be dismissed. In denying the dismissal U.S. District Judge Denise Cote denied that motion, ensuring the case will go forward.

In April, the U.S. Department of Justice filed a suit alleging that Apple and those publishers privately conspired to institute an agency pricing model, allowing publishers to set their own e-book prices on iTunes and iBooks, in exchange for a 30 percent cut of each sale and a promise to not offer the books to other retailers at a lower price. (Read a PDF of the suit here, via The Wall Street Journal.) The model itself is not illegal, but the alleged conspiracy, meant to combat Amazon’s aggressively low-priced e-books, is at the heart of the suit.

“It has everything to do with coordinating a horizontal agreement among publishers to raise prices, and eliminating horizontal price competition among Apple’s competitors at the retail level,” Cote, of the Southern District of New York, said in denying the motion.

The defendants have claimed the model was a competitive decision. Three publishers—Hachette, HarperCollins, and Simon & Schuster—have already agreed to settle. Apple, Penguin, and Macmillan have not. Fifteen states have joined the lawsuit and are seeking millions in restitution.

As I’ve noted before, the suit concerns trade e-books, those for consumers, rather than non-trade e-books, which include textbooks. Because textbooks have a different consumer model—they are typically sold to institutions, instead of directly to customers—the suit shouldn’t have an effect on textbook pricing, I’ve been told. If you remember, in their January deal with Apple to publish e-textbooks, Pearson, McGraw-Hill and Houghton Mifflin Harcourt agreed to offer the books at $14.99.

But the outcome of the deal could affect e-book pricing and the iBookstore, both of which are used by educators. So it’s something worth keeping an eye on.

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