Tennessee is among 15 states that filed suit Wednesday against Apple Inc. and three giant publishing companies, alleging they colluded to fix the sales prices of electronic books, thus violating state antirust laws and the federal Sherman Antitrust Act.
“As a result of the conspiracy, consumers nationwide, in aggregate, paid substantially more than one hundred million dollars in overcharges on e-books,” the suit reads.
The states’ antirust action comes as the United States Department of Justice filed a matching suit Wednesday morning that accuses Apple, Macmillan Holdings, and Penguin Group USA and Simon & Schuster Digital Sales of conspiring together to set their own prices for e-books which forced customers to pay more for e-books.
Two other publishing companies, Harper Collins and Hachette, have agreed to settle, and are therefore not listed as defendants.
“The ultimate result with price-fixing is that consumers pay more than they would have in a free marketplace,” Tennessee Attorney General Bob Cooper said in a statement. “Our joint lawsuit alleges three of the nation’s largest publishing companies worked together to gain control of retail prices, allowing publishers to raise the price of e-books.”
The suits follow a two-year department of justice investigation into allegations that the defendants conspired to raise e-book prices.
“For years, retailers traditionally sold e-books through a wholesale distribution model, under which retailers rather than publishers set e-books’ sales prices,” according to a Tennessee Attorney General’s Office press release. “However, the investigation alleged revealed that Penguin, Simon & Schuster and Macmillan conspired with other publishers and Apple to artificially raise prices by imposing a distribution model in which the publishers set the prices for bestsellers at $12.99 and $14.99.
“When Apple prepared to enter the e-book market, the publishers and Apple agreed to adopt an agency distribution model as a mechanism to allow them to fix prices,” the release continued. “To enforce their price-fixing scheme, the publishers and Apple relied on contract terms that forced all e-book outlets to sell their products at the same price. Because the publishers agreed to use the same prices, retail price competition was eliminated. According to the States’ enforcement action, the coordinated agreement to fix prices resulted in e-book customers paying more than $100 million in overcharges.”
In addition to Cooper, state attorneys from Alaska, Arizona, Colorado, Connecticut, Illinois, Iowa, Maryland, Missouri, Ohio, Pennsylvania, South Dakota, Texas, Vermont and West Virginia are plaintiffs in the action. The commonwealth of Puerto Rico has also signed onto the suit.
The states’ antitrust was filed Wednesday in U.S. District Court in Austin, Texas.