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Apple, leading US publishers, charged with collusion

Two plaintiffs in an anti-trust lawsuit claim that Apple and five publishers colluded to drive up Amazon's low e-book prices, raising profits for publishers and making Apple's iPad more competitive against Amazon's Kindle.

By Megan WassonMonitor contributor / August 10, 2011

On the day of the iPad launch, did Apple founder Steve Jobs already know that Amazon would be forced to raise prices on its e-books?

Beck Diefenbach/Reuters

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Something fishy may be happening in the e-book world.

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Apple, Hachette Book Group, Penguin Group Inc., Simon & Schuster Inc., Macmillan Publishers, and HarperCollins Publishers have just been slapped with a class action anti-trust lawsuit.

The Hagens Berman law firm of northern California is bringing the suit and the plaintiffs – according to the Hagens Berman website – are Anthony Petru of California and Marcus Mathis of Mississippi.

Hagens Berman claims that Apple and the five publishers colluded to drive up e-book prices and eliminate Amazon's lead in the e-book market. Amazon previously sold e-books at $9.99, for less money than the physical books cost and often at a loss in order to drive up demand for e-books and thus, the Amazon Kindle.

The plaintiffs believe that Apple, about to release the iPad that it hoped with compete with the Kindle as an e-reader, and publishers, annoyed at Amazon's low prices, worked together to force Amazon to drive up prices. They did this by forcing Amazon to stop using discount pricing and start using the agency model.

The agency model allows publishers to set prices for their e-books, with the online store taking a portion of the price. Previously Amazon had bought e-books from publishers and set its own low prices. In the agency model, according to Ars Technica, Amazon would not be allowed to sell e-books at prices lower than those set by the publishers. Since the publishers in question supposedly control 85% of the popular books on Amazon, it was inevitable that Amazon would have to raise e-book prices – and it since has.

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