Simpsons Solicitors

U.S Publishers Face Storm Over eBook Agency Pricing Model

September 5th 2011

August has seen the launch of two consumer class-action cases in the United States against publishers.  Both cases relate to sales of books via the Apple store.

The first, filed in the US District Court for the Northern District of California, alleges that Apple and five publishers “colluded to increase prices for popular e-book titles”. The second, filed in the US District Court for the Southern District of New York, alleges that Apple and six publishers “implemented price-fixing agreements”.

The basis of each case relates to the use by Apple of an “agency pricing model”. Under this model, the publisher is effectively the direct seller, with the online store acting as its agent. Under this model, the publisher generally sets the price at which they would like the book to sell, with the online distributor effectively retaining a commission from that price – a model which is completely different to the model used, for example, for sales of physical books, where the publisher sells its books at a wholesale price, and then the purchaser decides what margin to add when it sells to its customers.  The argument is that, under the relevant legislation in the US, the agency model works as a price-fixing mechanism.

These cases follow investigations into similar issues in the European Union.