Lawsuit Against Agency Model Balloons

[Daithi]

Here is an article describing how the lawsuit that was filed against the Big 5 publishers and Apple has expanded. Back in August it was just one lawsuit, but now over a dozen lawsuits have been filed. Amazon and Barnes & Noble have also been named as defendents, and now the court system is looking at consolidating these lawsuits into one mega class action lawsuit.

I have no idea if these lawsuits will prevail, but two quotes towards the end of the article caught my attention. The first is--

To prevail, the publishers will have to persuade a court that their pricing scheme is reasonable. They may argue that it is on the grounds that the alternative was destroying their business.

I think the publishers will have a hard time with this since the typical cost of a new ebook is about $13 and they get 70% or $9.10, but they were receiving around 50% of list price which was around $24 or $12.00 a book. So now the book costs the consumers more, and both the publisher and the author make less. Yeah, good luck with that arguement.

The other quote is--

“They can’t just cry, ‘we’re losing business’,” said Barbara Sicalides, an anti-trust expert at Pepper Hamilton. She says publishers and Apple will likely have to produce sensitive business records to prove that the agency pricing model is ultimately necessary to protect consumers.

Once again, how are higher prices protecting the consumer?

[HarryT]

Surely the publishers don't have to convince the court of anything - they are innocent until proven guilty. Do they not have the right to run their businesses as they see fit, provided that they are operating within the boundaries of the law?

[murraypaul]

If they have all negotiated separately with retailers, and happened to have ended up with the same price, they have acted legally.
But if they have agreed between themselves to fix a price at which all would sell their products, then they are not acting legally, at least within the EU.

[Daithi]

I suppose the big publishers could take the position that they don't have to prove anything. However, the plaintiffs are going to be arguing that the Big 5 colluded with Apple in setting their prices. It certainly looks as if that is the case. The plaintiffs are also going to be arguing that the Big 5's anti-competitive practices are hurting the consumers. The plaintiffs already have pricing data to make their case, so the Big 5 and Apple better have some kind of defense.

Microsoft lost a huge anti-trust case over including a browser with their operating system, so yeah, I think the Big 5 and Apple might want to plan on defending their actions.

[fjtorres]

Innocent until proven guilty does not apply in the world of antitrust and consumer protection nor does "running your business as you see fit".
As the article points out, price fixing for any reason used to be illegal until very recently. This was relaxed but not abolished so the PriceFixSix will have to defend their actions in court.

If it were just *one* publisher they might actually have a chance but the concerted actions of the cabal and the timing of the launch (synchronized to Apple's iBooks annoucement) suggest more than just the viability of a fading business model was in play.

Two notable points to keep an eye on:
1- the fight over venue (SF vs NY). The publishers want the case in NY courts, which is their home turf, rather than in Tech country SF. This may be a mistake; in today's populist america no single corporation is going to be afforded much leeway this side of SCOTUS, much less 6.

2- some of the class actions suits name Amazon and/or B&N as defendants. The intent obviously is to paint them as beneficiaries of the price fixing and (most importantly) drag them into the discovery process. If this carries over into the consolidated lawsuit the odds of finding directly incriminating data goes way up.

Of course, as is typical of these monster legal jousts, by the time the issue gets settled the outcome will be irrelevant.

[HarryT]

Originally Posted by Daithi

The plaintiffs are also going to be arguing that the Big 5's anti-competitive practices are hurting the consumers.

Is that a crime? A company is legally obligated to act in the interests of its shareholders, not in the interests of the general public.

[Rob Lister]

Originally Posted by HarryT

Surely the publishers don't have to convince the court of anything - they are innocent until proven guilty. Do they not have the right to run their businesses as they see fit, provided that they are operating within the boundaries of the law?

At the heart of the flurry of lawsuits is a challenge to “agency pricing,” the e-book pricing model under which book publishers set their own prices for e-books, paying the e-tailer (“agent”) a commission. Agency pricing requires e-books to be priced the same across all e-bookstores, meaning an e-tailer like Amazon can’t put a book from a participating publisher on sale to gain an edge over a competing seller—only the publisher can do that; and if an e-book goes on sale at one e-bookstore, it has to be priced the same at all others.

price fixing.

[Hellmark]

Originally Posted by HarryT

Is that a crime? A company is legally obligated to act in the interests of its shareholders, not in the interests of the general public.

if they worked together to do so, then yes.

[fjtorres]

Originally Posted by Daithi

]
Microsoft lost a huge anti-trust case over including a browser with their operating system, so yeah, I think the Big 5 and Apple might want to plan on defending their actions.

And that was despite the fact that MS was only doing the same thing Apple and IBM did first and the judge ruling that they hadn't actually harmed Netscape.

In this case the harm to the plantiffs is clearly documented and not in dispute.

[Rob Lister]

Originally Posted by HarryT

Is that a crime? A company is legally obligated to act in the interests of its shareholders, not in the interests of the general public.

in this case it is a crime.

[rhadin]

Originally Posted by HarryT

Surely the publishers don't have to convince the court of anything - they are innocent until proven guilty. Do they not have the right to run their businesses as they see fit, provided that they are operating within the boundaries of the law?

Harry, innocent until proven guilty applies only in criminal actions. In civil actions, the plaintiffs only need to make a prima facie case and the defendants have to counter that. Unlike in a criminal case, they can't sit quietly unless the plaintiffs fail to carry even the minimal burden.

The publishers will have to convince the jury, whether it be a jury of citizens or the judge.

[rhadin]

Originally Posted by HarryT

Is that a crime? A company is legally obligated to act in the interests of its shareholders, not in the interests of the general public.

In America, the fiction is that a company is supposed to act in the interests of its shareholders. The realities that the courts adhere to is that they act on behalf of entrenched management regardless of whether that is in the best interests of shareholders or citizens.

[ilovejedd]

Originally Posted by Daithi

Amazon and Barnes & Noble have also been named as defendents, and now the court system is looking at consolidating these lawsuits into one mega class action lawsuit.

Don't see why Amazon is included in the lawsuit when they were against agency pricing in the first place. It just so happened they couldn't do anything but comply with the publishers' edict.

[HarryT]

Originally Posted by rhadin

Harry, innocent until proven guilty applies only in criminal actions. In civil actions, the plaintiffs only need to make a prima facie case and the defendants have to counter that. Unlike in a criminal case, they can't sit quietly unless the plaintiffs fail to carry even the minimal burden.

Thanks for the clarification - I didn't know that.

[jgaiser]

Originally Posted by ilovejedd

Don't see why Amazon is included in the lawsuit when they were against agency pricing in the first place. It just so happened they couldn't do anything but comply with the publishers' edict.

More than likely, so the plaintiffs can subpoena correspondence between Amazon and the Big 5. It's likely there are some interesting emails in that discovery.