Petru et al v. Apple, Inc. et al

Filing 1

CLASS ACTION COMPLAINT & Jury Trial Demanded - [Summons Issued] against Apple, Inc., Hachette Book Group, Inc., HarperCollins Publishers, Inc., Macmillan Publishers, Inc., Penguin Group (USA) Inc. & Simon & Schuster, Inc., [Filing Fee: $350.00, Receipt Number 44611007417] Filed by Plaintiffs Marcus Mathis &Anthony Petru. (Attachments: #(1) Civil Cover Sheet) (tn, COURT STAFF) (Filed on 8/9/2011)

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TABLE OF CONTENTS

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I. 

INTRODUCTION ..................................................................................................................... 1 

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II. 

PARTIES ................................................................................................................................... 4 

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III. 

JURISDICTION AND VENUE ................................................................................................ 5 

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IV. 

MARKET POWER OVER EBOOK SALES ........................................................................... 6 

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V. 

STRUCTURE OF THE INDUSTRY ........................................................................................ 9 

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VI. 

UNLAWFUL AGREEMENT TO RESTRAIN TRADE OR COMMERCE ......................... 10 

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VII. 

ANTITRUST INJURY ............................................................................................................ 27 

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VIII.  NATIONWIDE FEDERAL DIRECT PURCHASER CLASS ............................................... 27 

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IX. 

NATIONWIDE CALIFORNIA LAW CLASS....................................................................... 34 

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X. 

INDIRECT PURCHASER CLASS ACTION ALLEGATIONS............................................ 34 

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FIRST CAUSE OF ACTION
VIOLATION OF THE SHERMAN ACT (15 U.S.C. § 1) ..................................................... 37 

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SECOND CAUSE OF ACTION
VIOLATION OF THE CARTWRIGHT ACT
(California Business & Professions Code §§ 16720, et seq.) .................................................. 38 

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THIRD CAUSE OF ACTION
VIOLATIONS OF STATE ANTITRUST AND RESTRAINT OF TRADE
LAWS AND CONSUMER PROTECTION STATUTES ...................................................... 38 

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FOURTH CAUSE OF ACTION
VIOLATION OF THE UNFAIR COMPETITION ACT
(California Business & Professions Code §§ 17200, et seq.) .................................................. 40 

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FIFTH CAUSE OF ACTION
UNJUST ENRICHMENT ....................................................................................................... 41 

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JURY TRIAL DEMANDED .............................................................................................................. 41 

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PRAYER FOR RELIEF ...................................................................................................................... 41 

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Plaintiffs, by and through their attorneys, based on their individual experiences, the
investigation of counsel, and information and belief allege as follows:

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I.
1.

INTRODUCTION

In November 2007, Amazon revolutionized the book publishing industry by releasing

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the Kindle, a handheld digital reader for electronic books or “eBooks.” Using proprietary “electronic

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ink” technology, the Kindle replicated the appearance of ink on paper and introduced numerous

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efficiency-enhancing characteristics, including portability and other advantages of a digital format.

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A major economic advantage to eBook technology is its potential to massively reduce distribution

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costs historically associated with brick-and-mortar publishing. But publishers quickly realized that if

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market forces were allowed to prevail too quickly, these efficiency enhancing characteristics would

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rapidly lead to lower consumer prices, improved consumer welfare, and threaten the current business

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model and available surplus (profit margins). So, faced with disruptive eBook technology that

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threatened their inefficient and antiquated business model, several major book publishers, working

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with Apple Inc. (“Apple”), decided free market competition should not be allowed to work – together

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they coordinated their activities to fight back in an effort to restrain trade and retard innovation. The

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largest book publishers and Apple were successful.

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2.

The original Kindle sold out in less than six hours. To gain market share, take

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advantage of its first-mover advantage, and capitalize on the tremendous efficiencies associated with

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eBooks, Amazon set eBook pricing levels significantly below prices for physical books (“paper

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books” or “hardcover books”). Amazon set the prices of many of the popular new released eBook

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titles at $9.99. Amazon instituted this pro-consumer, discounted pricing even though on many titles

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publishers charged Amazon a wholesale price at or above $9.99.

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3.

Even though publishers were reaping the benefits of Amazon’s successful efforts to

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vastly expand the consumer base and increase volume of units sold via Amazon’s investment in

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eBook sales, publishers also feared Amazon’s $9.99 pricing. Amazon’s discount pricing threatened

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to disrupt the publishers’ long-established brick-and-mortar model faster than the publishers were

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willing to accept. Being hidebound and lacking innovation for decades, the publishers were

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particularly concerned that Amazon’s pro-consumer pricing of eBooks would negatively impact their
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moribund sales model, and in particular the sale of higher priced physical copies of books. And,

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longer term, publishers anticipated Amazon would eventually use its market power to reduce the

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publishers’ share of the available surplus (profit margins) from each eBook sale.

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Given Amazon’s first-mover advantage and ever growing installed user base,

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publishers knew that no single publisher could slow down Amazon and unilaterally force an increase

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in eBook retail prices. If one publisher acted alone to try and raise prices for its titles, that publisher

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would risk immediately losing a substantial (and growing) volume of sales. Not wanting to risk a

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significant loss of sales in the fastest growing market (eBook sales), the publishers named as

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defendants (“Publisher Defendants”) solved this problem through coordinating between themselves

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(and Apple) to force Amazon to abandon its pro-consumer pricing. The Publisher Defendants

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worked together to force the eBook sales model to be entirely restructured. The purpose and effect

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of this restructuring was to halt the discounting of eBook prices and uniformly raise prices on all first

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release fiction and nonfiction published by these Publisher Defendants. Under the Publisher

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Defendants’ new pricing model, known as the “Agency model”, the Publisher Defendants have

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restrained trade by coordinating their pricing to directly set retail prices higher than had existed in the

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previously competitive market.

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5.

The Publisher Defendants’ unlawful combination and pricing agreement would not

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have succeeded without the active participation of Apple. Apple facilitated changing the eBook

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pricing model and conspired with the Publisher Defendants to do so.

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6.

Apple had strong incentives to help the Publisher Defendants to restrain trade and

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increase the price of eBooks. If Amazon continued to solidify its dominant position in the sale of

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eBooks, strong network effects would make it difficult to dislodge Amazon. Moreover, Amazon’s

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pro-consumer pricing meant that to enter the eBooks market Apple would likely be forced to sell at

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least some eBooks near or below its wholesale costs for an extended period of time. Apple did not

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want to enter the eBooks market subject to this margin pressure caused by Amazon’s pricing. But at

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the same time, Apple believed that it had to enter the eBook market because the Kindle was (and is)

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a competitive threat to Apple’s business model. Apple is competing to be – and has become – a

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dominant manufacturer of mobile devices, such as Apple’s iPod, iPhone and iPad devices. These
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devices are designed to distribute, store, and access digital media through Apple’s iOS platform,

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including Apple’s App Store and iTunes Store.

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Apple knew that if Amazon could establish the Kindle as the dominant eBook reader

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by subsidizing the purchase of eBooks, Amazon could then use the Kindle platform (and its large

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installed user base) to distribute other digital media. Notably, Apple had successfully used a

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virtually identical strategy to gain a virtual monopoly on the distribution of digital music files

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through its iPod device and its associated iTunes store.

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8.

The Publisher Defendants and Apple implemented this unlawful agreement and

combination on or before January 2010, when five of the six major book publishers of fiction and

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nonfiction works almost simultaneously announced that they were switching from a wholesale

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pricing model to an Agency model for eBook sales. This was an unprecedented industry shift in

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pricing (and sales model) in the book industry in the United States. The announcements to shift to

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the Agency model coincided with the release by Apple of the iPad tablet computer. In fact, when

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Apple announced the launch of the iPad on January 27, 2010, the Publisher Defendants agreed to

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allow Apple to use their trademarks in connection therewith.

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9.

The same day Apple announced launching the iPad, it was also announced that Apple

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already struck deals with Hachette, HarperCollins, Macmillian, Penguin, and Simon & Schuster to

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switch to the Agency model for Apple’s iBookstore – the application on Apple’s iPad that functions

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as an eBook reader (thus competing directly with the Amazon Kindle).

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10.

As part of the unlawful agreements, and seeking to leverage its installed user base and

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dominant position via the Apple iOS platform, Apple and the Publisher Defendants agreed that prices

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for Publisher Defendants’ eBooks that were offered through the iBookstore would be calculated by a

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formula tied to physical books. This eBook formula would cause current prices for eBooks to

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increase and, at the same time, would guarantee Apple that the Publisher Defendants would not sell

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eBooks at lower prices elsewhere, such as through other eBook distributors, including Amazon. The

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intended effect of this agreement was to force Amazon to abandon its discount pricing of eBooks and

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allow the Publisher Defendants to establish uniformly higher prices for new release eBooks.

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11.

The conspiracy and agreements worked as intended: (1) the Defendants increased and

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stabilized eBook pricing; and (2) forced Amazon to stop the discounting eBook prices on Publisher

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Defendants’ titles.

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12.

As a direct result of this anticompetitive conduct as intended by the conspiracy, the

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price of eBooks has soared. The price of new bestselling eBooks increased to an average of $12-

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$15 – an increase of 33 to 50 percent. The price of an eBook in many cases now approaches – or

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even exceeds – the price of the same book in paper even though there are almost no incremental

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costs to produce each additional eBook unit. The price of the Publisher Defendants’ eBooks sold on

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the iBookstore, facing no pricing competition from Amazon or other e-distributors for the exact same

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eBook titles, has remained at supra-competitive levels.
13.

Plaintiffs bring claims under federal and state antitrust laws to enjoin the illegal

conduct and to obtain damages.

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II.
14.

PARTIES

Plaintiff Anthony Petru is a resident of Oakland, California. Plaintiff Petru purchased

at least one eBook at a price above $9.99 from a Publisher Defendant for use on his Amazon Kindle.
15.

Plaintiff Marcus Mathis is a resident of Natchez, Mississippi. Since May 2010,

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Plaintiff Mathis has purchased several eBooks from Publisher Defendants at a price above $9.99 for

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use on his Sony Reader.

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16.

Plaintiffs paid higher prices for their eBooks as a direct and foreseeable result of the

unlawful conduct set forth below.
17.

Defendant Apple is a California corporation having its principal place of business at 1

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Infinite Loop, Cupertino, CA 95014. Apple is a leading manufacturer of mobile devices designed to

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distribute, store, and display digital media. Examples of such devices include the Apple iPad device,

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a tablet computer which supports several eReader applications, including the Kindle App, and

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Apple’s proprietary app, iBookstore.

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18.

Defendant Hachette Book Group, Inc. (“Hachette”) is a leading U.S. trade publisher

with its principal place of business at 237 Park Ave., New York, NY 10017. Its imprints include

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Little, Brown & Co. and Grand Central Publishing. On information and belief, Hachette is owned by

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Hachette Livre, a French company.

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Defendant HarperCollins Publishers, Inc. (“HarperCollins”) is a leading U.S. trade

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publisher with its principal place of business at 10 East 53rd St., New York, NY 10022. Its imprints

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include Ecco, Harper, Harper Perennial and William Morrow. On information and belief,

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HarperCollins is a subsidiary of News Corporation.

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20.

Defendant Macmillan Publishers, Inc. (“Macmillan”) is a group of leading publishing

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companies with its principal place of business at 175 Fifth Ave., New York, NY 10010. Its U.S.

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publishers include Farrar Straus and Giroux, Henry Holt & Company, Picador, and St. Martin’s

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Press. On information and belief, Macmillan is held by Verlagsgruppe Georg von Holtzbrinck,

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which is based in Stuttgart, Germany.

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21.

Defendant Penguin Group (USA) Inc. (“Penguin”) is the U.S. affiliate of Penguin

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Group, one of the largest English-language trade book publishers in the world. Penguin’s principal

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place of business is at 375 Hudson St., New York, NY 10014. Its imprints include Viking,

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Riverhead Books, Dutton and Penguin Books.

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22.

Defendant Simon & Schuster, Inc. (“Simon & Schuster”) is a leading U.S. trade

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publisher with its principal place of business at 1230 Avenue of the Americas, New York, NY

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10019. Its imprints include Simon & Schuster, Scribner, Atria and Gallery Books. On information

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and belief, Simon & Schuster is part of CBS Corporation.

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Defendants Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster

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(collectively the “Publisher Defendants” or “Agency 5”) comprise five of the country’s six largest

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publishers.

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III.
24.

JURISDICTION AND VENUE

This Court has subject matter jurisdiction over this action pursuant to 15 U.S.C. §§ 4

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and 15; and 28 U.S.C. §§ 1331 and 1337, in that this action arises under the federal antitrust laws.

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The Court has supplemental subject matter jurisdiction of the pendant state law claims under 28

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U.S.C. § 1367. The Court also has diversity jurisdiction over this action pursuant to 28 U.S.C.

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§ 1332(d) because the amount in controversy for the Class exceeds $5,000,000, and there are

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members of the Class who are citizens of a different state than the Defendants.

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25.

Venue is proper in this District under 28 U.S.C. § 1391(b) and (c) and Sections 4 and

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12 of the Clayton Act, 15 U.S.C. §§ 15 and 22, because Defendants reside, transact business or are

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found within this District, and a substantial part of the events giving rise to the claims arose in this

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District.

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Intradistrict Assignment: Assignment to the San Francisco or Oakland division of this

Court is proper because a substantial portion of the events giving rise to the claims occurred therein.

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IV.
27.

MARKET POWER OVER EBOOK SALES

An eBook is an e-text that forms the digital media equivalent of a conventional print

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book, sometimes restricted with a digital rights management (DRM) system. eBooks represent a

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distinct antitrust market. The geographic market is the entire United States. No reasonable substitute

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exists for eBooks. Consumers who purchase eBooks value their flexibility and portability.

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Consumers of eBooks can carry thousands of publications with them on a single device and have the

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ability to immediately purchase books rather than having to go to a bookstore. In addition to saving

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time by not having to go to a bookstore, eBook readers need not pay shipping costs associated with

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online purchases of physical books. Moreover, eBooks have a highly unique distribution

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methodology and unique pricing. The industry also views eBooks as a separate economic segment

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of the more general book market.

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28.

A hypothetical monopolist that controlled the supply of eBooks would have the ability

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to raise the price of eBooks substantially for a significant period of time without consumers

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substituting another product.

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29.

In addition, the Publisher Defendants and Apple have exerted market power over

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eBook sales, as directly demonstrated by the anticompetitive effects of their conduct. Here,

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Defendants exercised market power as evidenced by their ability to raise prices above the

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competitive level – by increasing prices by at least thirty to fifty percent above similar books

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published under the wholesale model as demonstrated below:

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V.

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30.

STRUCTURE OF THE INDUSTRY

eBooks are usually read on dedicated hardware devices known as eReaders. Personal

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computers, tablets and some cell phones can also be used to read eBooks. eBooks are sold directly

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through eReaders, as well as through the web.

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31.

Sony launched the first commercially successful eReader, the Sony Reader, in 2006.

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The following year, Amazon released the Kindle. The Kindle utilized “electronic ink” technology to

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replicate the look of a paper book while providing the portability associated with digital files.

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Amazon’s Kindle quickly became the market leader by offering a much broader selections of books

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than Sony and offering them at a standard pro-consumer price of $9.99.

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32.

Amazon instituted its discounted pricing model even though in many instances the

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wholesale price it paid equaled or even exceeded $9.99. Amazon was willing to establish this price

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level in part to grow market share. Amazon also knew that with sufficient buying power and

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efficiencies it could eventually reduce the surplus publishers were paid for eBooks, thereby

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increasing Amazon’s margins.

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33.

Amazon’s disruptive technology forced traditional booksellers to respond by

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introducing competing technology and pricing. In 2009, Barnes & Noble released its own eReader –

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the Nook – and tried to match Amazon’s pro-consumer pricing. Following Barnes & Noble’s

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announcement, Sony similarly announced that it would adopt the $9.99 pricing for its Sony Reader.

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Nevertheless, Amazon’s eBook prices were almost always lower than that of its competitors such as

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Sony and Barnes & Noble. A study by the Inkmesh eBook search engine reported that Amazon had

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the lowest prices nearly 75 percent of the time.

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34.

Although Amazon’s $9.99 pricing policy was near or even sometimes below the price

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Amazon paid to book publishers for certain mass market eBook content, its aggressive eBook pricing

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practices succeeded in fueling Kindle sales and increasing Amazon’s share of the eReader market.

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According to Credit Suisse, as of February 2010 Amazon’s Kindle eBooks occupied 90 percent of

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the market for eBooks.1

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1

Google Writes New Chapter in E-Book Saga, The eMarketer Blog, http://www.emarketer.
com/blog/index.php/google-writes-chapter-ebook-saga/ (last visited Aug. 8, 2011).
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35.

At least in part as a result of Amazon’s pro-consumer practices, consumers rapidly

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starting adopting new book reading habits, making eBooks hugely popular. The Association of

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American Publishers reports that eBooks are the fastest-growing segment of the book publishing

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industry. In July 2010, Amazon reported sales of eBooks for its Kindle in the second quarter of 2010

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outnumbered sales of hardcover books for the first time. In February 2011, the New York Times

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added an eBook bestseller list.

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36.

Hardcover books, specifically the sale of front list titles, form the core sales for the

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Agency Five (who in turn sell about 75to 85 percent of the fiction market). Publishers have the

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highest margin per unit of sale from printed hardcovers which are sold to the trade (wholesalers,

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booksellers, etc.) at discounts of 30 to 60 percent off the list price depending on the account.
37.

While eBook sales provided additional incremental unit sales over physical books, in

an unrestrained market the margin per unit of sale for eBooks is lower than physical books.
38.

Thus, publishers had the economic incentive to do two things: (a) slow down the rate

of eBook adoption, and (b) protect – and even increase – the margins for eBook sales.
39.

By slowing down the rate of adoption and increasing prices, new entrants into the

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digital market will be less inclined to demand a $9.99 price point made popular by Amazon. An

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article in Psychology Today that refers to this as anchoring:

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At issue is the phenomenon of “anchoring,” discovered by Amos
Tversky and Daniel Kahneman. When people don’t know what a
fundamentally new product should cost, they are strongly influenced
by the first price they encounter.

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40.

Further, the Publisher Defendants knew that for the minority of consumers who in

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response to price increases for eBooks under the new Agency model elected to make a purchase from
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the print market, it would only benefit the publishers because the print margin is frequently larger
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than eBook margins under the Agency model.
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VI.

UNLAWFUL AGREEMENT TO RESTRAIN TRADE OR COMMERCE

41.

The $9.99 standard eBook price Amazon set threatened the economic models of many

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large publishers. With decreasing retail prices for eBooks, publishers feared the rapidly increasing
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movement by consumers away from physical book purchases – on which publishers had built their
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businesses for centuries. They also anticipated that, as the popularity of eBooks grew, Amazon and

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other retailers would pressure publishers to reduce their wholesale prices for eBooks, thereby

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reducing their profit-per-unit. Publishers were used to having the ability to help establish predictable

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retail prices based on longstanding pricing behavior in the paper book industry. Under the decades-

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old model, the publishers and their supply chain partners would agree on a standard discount schedule in

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which the retailer would purchase the book for a percentage below the suggested retail price, and the

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publishers would control the speed of pricing decay by phasing in discounted pricing through later release

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of paperback books (“windowing”). This phenomenon, known as intertemporal price discrimination,

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allowed publishers to maximize their profits by charging more to early adopters.

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42.

In response to Amazon’s disruptive business model, the Publisher Defendants took

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steps to mitigate what they perceived to be the potential future reduced profits associated with eBook

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sales. For example, several major publishers, including HarperCollins, held back the release (reduced

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output) of eBook versions of some hardcover bestsellers by windowing the release a month or more

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after the hardcover release. For its part, Macmillan lowered its royalty rate for eBooks by 5 percent.

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43.

In addition to windowing techniques, Publisher Defendants also tried to pressure

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Amazon to raise retail prices on eBooks; but Amazon steadfastly refused. Absent coordination, the

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Publisher Defendants were unable to force Amazon to raise its eBooks retail prices. Given

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Amazon’s dominant market share for eBook sales, each publisher knew that if it tried to unilaterally

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insist on raising retail prices it would immediately lose eBook sales and market share to its rivals.

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44.

Amazon’s success was also causing concern in other quarters. Specifically, Apple

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had strong incentives to help the Publisher Defendants force Amazon to abandon its pro-consumer

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pricing. Apple knew that devices like the Kindle are characterized by strong network effects; that is,

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the value of a Kindle to an individual purchaser rises as the total number of purchasers increase.

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This occurs because growth in the installed base attracts additional and superior content and drives

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down prices. Because of these network effects, Apple knew that if Amazon were allowed to

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continue to solidify its dominant position in the eBook market, these network effects would make it

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nearly impossible to dislodge Amazon in the near-term. Apple knew the power of this strategy

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because it had used a virtually identical strategy to dominate the sale and distribution of digital music

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files.

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45.

Apple’s interest in entering the eBooks market was not simply to profit from the sale

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of eBooks. Apple believed it was necessary to enter the eBooks market because it viewed Amazon

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and its Kindle platform as a long-term threat to its dominant position in the sale and marketing of

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mobile devices designed to distribute, store and access digital media, and Apple’s iOS content

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distribution platform. These devices included the Apple iPhone, iPod, and iPad.

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46.

At the same time, Amazon’s pro-consumer pricing meant that in order to enter the

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eBooks market, Apple would likely be forced to sell at least some eBooks near or below the input

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cost for an extended period of time. Indeed, to gain market share, Apple might even be forced to

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offer eBooks at an even lower price than Amazon offered. Apple and the Publisher Defendants thus

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shared a common anticompetitive interest in forcing Amazon (and the rest of the market) to raise the

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prices for eBooks.

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47.

Recognizing Apple’s interest in protecting and expanding its dominant position in the

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sale and marketing of mobile devices designed to distribute, store and access digital media, Amazon

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had already taken steps to compete with Apple. After numerous commentators observed that

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Apple’s popular App Store offered 70 percent of royalties to software application publishers,

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Amazon began a program that offered 70 percent royalties to Kindle publishers who agreed to certain

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conditions. In order to be eligible, authors were required to list their books for between $2.99 and

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$9.99 on the Kindle, and the price had to be at least 20 percent below the lowest list price for the

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print edition.

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48.

In January 2010, Apple and the Publisher Defendants agreed to a plan that would

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allow Apple to erode Amazon’s market position and benefit Apple and the Agency 5 by raising

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prices on first release eBooks.

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49.

On January 23, 2010, industry newsletter Publishers Lunch reported that Apple had

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negotiated agreements with Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster to

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switch from a wholesaler-retailer model to an “Agency model” for eBook sales.

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50.

Four days later, on January 27, 2010, Apple announced a multi-function tablet device

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called the iPad. One of the functions of the iPad was the ability to read eBooks. This put Apple into

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direct competition with Amazon, who at the time of the iPad’s release, had an overwhelming share of

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the markets for eBooks and eReaders.

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51.

When Apple announced the iPad’s debut in January 2010, its CEO Steve Jobs

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indicated that Apple had agreements in place with five of the six largest publishing houses –

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Hachette Book Group, HarperCollins, Macmillan, Penguin, and Simon & Schuster – to provide

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eBook content for the new device.2 Those agreements were based on a so called “Agency model”

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which gives publishers the ability to set eBook prices and makes Apple a distribution agent for sales

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to consumers.3 Apple receives a thirty-percent commission from each eBook sale through Apple’s

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online bookstore, with the remaining seventy percent going to publishers (who in turn then

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compensate the authors pursuant to whatever arrangement exists between the publisher and author).4

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The publishers’ authority to price under their agreements with Apple, however, is restrained as the

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contracts contain a formula that ties eBook prices to the list prices of comparable print editions. This

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common formula agreed to by the Publisher Defendants and Apple operates to increase, standardize,

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and stabilize most first-release general fiction and nonfiction titles. The effect of this term will

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increase and stabilize eBook prices to a range of $12.99 to $14.99 for most general fiction and

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nonfiction titles.5 Apple and the Publisher Defendants also agreed that the Publisher Defendants

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would not set prices of eBooks offered through other distribution channels (e.g., Amazon’s Kindle

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store) below the prices the Publisher Defendants sold through the iBookstore (the “MFN Clause”).6

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2

Motoko Rich, Books on iPad Offer Publishers a Pricing Edge, N.Y. Times, Jan. 28, 2010, at

B6.
3

Motoko Rich, Apple’s Prices for E-Books May Be Lower Than Expected, N.Y. Times,
Feb. 18, 2010, at Bl0.
4
Id.; Motoko Rich & Brad Stone, Publisher Wins Fight on E-Books, N.Y. Times, Feb. 1, 2010,
at Bl.
5

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Rich, supra note 3; see also Jeffrey Trachtenberg & Geoffrey A. Fowler, E-Books Pricing
Put Into Turmoil, Wall St. J., Feb. 1, 2010, at A.
6
Rich, supra note 3. The agreement also reportedly contains language allowing Apple to
obligate publishers to discount eBook prices on bestsellers below the $12.99 to $14.99 range in order
to compete with brick-and-mortar bookstores and competing online sites. Id.
CLASS ACTION COMPLAINT
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1

52.

The effect of the MFN Clause, combined with the pricing formula tied to physical

2

book prices, was to increase prices and reduce competition for the eBooks of the Publisher

3

Defendants, specifically for the price of most newly released adult fiction and nonfiction eBooks;

4

this resulted in increasing and stabilizing eBook prices and eliminated competitive pricing. Apple

5

coordinated these agreements with the Agency 5. On information and belief, in the course of

6

entering into agreements with Apple, Apple and the Agency 5 communicated the terms of the

7

agreements and pricing information with each other, including signaling to each other that they

8

would agree to the MFN Clause and price formula that would increase and standardize pricing to a

9

range between $12.99 to $14.99.

10

53.

It was well understood and intended by the Publishing Defendants and Apple that

11

their agreements would raise prices for consumers of eBooks. For example, on February 2, 2010,

12

Rupert Murdoch, News Corp. CEO, indicated he was unhappy with Amazon’s prices and that the

13

agreement with Apple would help to achieve “higher prices.”

14

54.

In contrast to the Agency model, under the wholesale distribution model that

15

traditionally has governed their relationships with brick-and-mortar bookstores and other online

16

sellers like Amazon, publishers essentially “sold” their products to retailers for a fixed (wholesale)

17

price – typically half the list price of the print edition – and surrendered control over the final price

18

ultimately charged to consumers.7 In order to spur demand for eBooks (as well as for its own

19

eReader, the Kindle), Amazon set $9.99 as the standard price for most new releases, even though at

20

times Amazon purchased the content near or above $9.99.8 Notwithstanding Amazon’s pricing has

21

driven rapid adoption of eBook sales, publishers have disapproved of Amazon’s discount model,

22
23
24
25
26
27
28

7

Donald Marron, How Should We Price E-books, CHRISTIAN SCI. MONITOR, Aug. 23, 2010,
http://www.csmonitor.com/Business/Donald-Marron/2010/0805/How-should-we-price-e-books; Paul
Biba, Why Smashwords Moved to “Agency Pricing” – Explained by Mark Coker,
http://teleread.com/paul-biba/why-smashwords-moved-to-agency-pricing-explained-by-markcoker/,
Dec. 2, 2010 (reviewing traditional wholesale model for pricing and distributing books and
chronology of shift to agency arrangements).
8

Rich & Stone, supra note 4; Erica Naone, iPad Rattles the e-Bookshelves, Tech. Rev., Feb. 2,
2010, http://www.technologyreview.com/computing/24443/?a=f (“Under its existing model, Amazon
buys books from publishers for a set fee in bulk [and] reportedly often pays publishers more than
$9.99 for some books, selling them at a discount in order to drive adoption of the Kindle”).
CLASS ACTION COMPLAINT
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1

fearing it would lead to lower sales of hardcover books and, in the long term, it would condition

2

consumers to expect lower price points for all books.9

3

55.

Once the Publisher Defendants and Apple agreed to the radical switch to the Agency

4

model, the Publisher Defendants approached Amazon to require it to switch to a similar structure.

5

The showdown between Amazon and Macmillan in particular was widely chronicled in the press.

6

56.

Macmillan reportedly proposed that Amazon agree to sell Kindle editions of

7

Macmillan’s books as an agent, on the same 70/30 terms contained in the Publisher Defendants’

8

agreement with Apple.10 Alternatively, Macmillan offered to permit Amazon to keep purchasing

9

eBooks under the existing wholesale model, but warned that it would begin delaying release of those

10

eBook editions (reducing output) until seven months after publication of the hardcover edition.11

11

The latter offer would have crippled Amazon’s competitive position against Apple.

12

57.

MacMillan was able to threaten Amazon with this ultimatum even though Amazon at

13

the time possessed ninety-percent of the market share for eBook sales, because, on information and

14

belief, Macmillan knew each of the other Publishing Defendants had reached similar agreements

15

with Apple. Like Macmillan, the other Publisher Defendants and Apple had agreed to a pricing

16

formulae and MFN clauses, assuring themselves that Amazon would be closed out of the market for

17

the Publisher Defendants’ eBook titles unless Amazon agreed to allow the Publisher Defendants to

18

raise prices.

19
20
21
22
23
24
25
26
27
28

9

See, e.g., Jack Shafer, Does the Book Industry Want to Get Napstered?, Slate, July 15, 2009,
http://www.slate.com/of/2222941/; Stone & Rich, supra note 1 (explaining that the attraction of the
agency model to publishers is driven by their “fear that Amazon has accustomed buyers to
unreasonably low prices’ and their conviction that “if Kindle were to maintain its dominant position
[in eBook sales], it could force publishers to lower their wholesale prices”).
10
Brad Stone & Motoko Rich, Amazon Removes Macmillan Books, N.Y. Times, Jan. 30, 2010,
at B4. See also Letter from John Sargent to All Macmillan authors/illustrators and the literary agent
community (Jan. 30, 2010) (Sargent Letter), available at
http://www.publishersmarketplace.com/lunch/macmillan_30jan10.html.
11

See Stone & Rich, supra note 10 (quoting Sargent as saying “I told [Amazon] that they could
stay with their old terms of sale, but that this would involve extensive and deep windowing of
titles”); Sargent Letter, supra note 10.
CLASS ACTION COMPLAINT
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1
2

58.

Amazon made an initial effort to fight by pulling all Macmillan titles off both the

Kindle site and Amazon.com.12

3

59.

Amazon briefly ceased sales of Macmillan titles; however, by the end of the weekend,

4

the books were back for sale and Amazon had bowed to Macmillan’s demands.13 In a strongly

5

worded message on its website, Amazon stated, “We have expressed our strong disagreement and the

6

seriousness of our disagreement by temporarily ceasing the sale of all Macmillan titles. We want

7

you to know that ultimately, however, we will have to capitulate and accept Macmillan’s terms

8

because Macmillan has a monopoly over their own titles, and we will want to offer them to you even

9

at prices we believe are needlessly high for e-books.” Very soon after, Amazon entered into agency

10

agreements with each of the four other major publishers that had signed on with Apple.14

11

60.

Hachette also forced Amazon to switch to the Agency model. On April 1, 2010,

12

Amazon posted the following message on its website: “[Hachette] has disallowed the sale of ebooks

13

except on agency terms effective as of 12:01 am this morning. We came to terms late last night but

14

we cannot be operationally ready to sell their ebooks on agency terms until two days from now –

15

April 3 – when we will also cut over for the other publishers that are switching to agency. If we can

16

get a two day extension from Hachette to continue selling their ebooks under the prior terms, we can

17

have the Hachette ebooks promptly back for sale today. If not, then they will be back on April 3.”

18
19
20
21
22
23
24
25
26
27
28

12

Stone & Rich, supra note 10. Amazon did, however, permit the continued sale of Macmillan
books by third parties on Amazon.com. See Sargent Letter, supra note 10.
13
See Whose Move? Amazon and Macmillan Vie for Position, L.A. Times,
http://latimesblogs.latimes.com/jacketcopy/2010/oz/amazon-macmillanconflict.html (quoting
Amazon letter to Kindle customers indicating that “despite its strong disagreement” Amazon was
giving in to Macmillan’s terms because “Macmillan has a monopoly over their own titles, and we
will want to offer them to you even at prices we believe are needlessly high for e-books”);
Trachtenberg & Fowler, supra note 5. Shortly thereafter, Sony reportedly also switched over to the
agency model. John Timmer, E-book Prices to Rise as Amazon, Sony Adopt Agency Model,
Apr. 2010, http://www.arstechnica.com/gadgets/news/2010/04/e-book-prices-to-rise-asamazon-sonyadopt-agency-model.ars. Google has apparently also given in to publishers’ demands and is offering
them agency agreements to participate in its recently launched Google e-books store. Murad Ahmed,
E-books: Publishers Poised for Victory in Latest Battle, The Times (London), Feb. 15, 2010; Samo
& Kellogg, Google to Take on Amazon, Apple, Barnes & Noble with New e-book Store, L.A. Times,
Dec. 6, 2010, http://latimesblogs.latimes.com/technology/2010/12/google-amazon-apple-barnesnoble-with-new- e-book-store-kindle.html.
14

At that point Random House was the only one of the six major U.S. publishers to stick with
the wholesale distribution model. See Jeffrey A. Trachtenberg, Random House Balks at Apple’s
Book Pricing, Wall St. J., Apr. 5, 2010, at B4; Marron, supra note 7.
CLASS ACTION COMPLAINT
010260-11 467168 V1

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1

61.

Penguin also forced Amazon to adopt the Agency model. On April 1, 2010, Penguin

2

sent a letter to its agents and authors that read, in part: “In recent weeks we have been in discussion

3

with our retail partners who sell eBooks, including Amazon, to discuss our new terms of sale for

4

eBooks in the U.S. At the moment, we have reached an agreement with many of them, but

5

unfortunately not Amazon – of course, we hope to in the future. Your newly released eBook is

6

currently not available on Amazon, but all of your eBooks released prior to April 1st are still for sale

7

on their site. . . . Our conversations with Amazon are ongoing and we do hope to continue our long-

8

term relationship with them.”

9
10

62.

Amazon to adopt the Agency model in the same time period.

11
12

On information and belief, HarperCollins and Simon & Schuster similarly pressured

63.

As a result of the coordinated and unlawful conduct of the Defendants, Sony and

Barnes & Noble have also been forced to adopt the Agency model for eBook pricing.

13

64.

Consumers were clearly angered by the switch to the Agency model and the

14

anticipated rise in eBook prices that it would engender. In March 2010, after the switch was

15

announced but before it was effectuated, eBook sales increased 184 percent. Some Kindle users

16

posting in various online communities attributed the sudden spike in eBook sales to a last ditch effort

17

by readers to stock up on eBooks before the switch to the Agency model. One such user stated:

18

“Myself and another kindle owner definitely bought more books before Agency model, perhaps 8

19

each.”

20

65.

On information and belief, the Publisher Defendants’ increase in prices resulted in a

21

short-term reduction in eBook sales revenues under the Agency model. The Publisher Defendants

22

accepted this short-term reduction in sales and profits in exchange for the ability to raise retail prices

23

and extra supra-competitive profits in the long term.

24

66.

Collusion was a necessary ingredient of the Publisher Defendants’ anticompetitive

25

plan to gain direct control over eBook pricing. If they had not all conspired to force retailers like

26

Amazon to adopt the Agency model under the same terms and at the same time, consumers would

27

have simply reacted to rising eBook prices by choosing to purchase their eBooks from publishers or

28

retailers who did not participate in the Agency model.
- 17 CLASS ACTION COMPLAINT
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1

67.

Indeed, this is exactly what happened in the case of Random House, the only big six

2

publisher who did not conspire with Apple to adopt the Agency model in early 2010. Random

3

House continued to use the wholesale model, allowing Amazon and other eBook distributors to price

4

eBooks below the Agency 5. In 2010, Random House saw a 250 percent increase in eBook sales in

5

the United States in 2010 and an 800 percent increase in the United Kingdom.

6

68.

As a result of Random House being willing to allow price competition, Apple – per its

7

agreements with the Agency 5 – refused to allow Random House to sell its books through Apple’s

8

iBookstore. Absent the anticompetitive restraints agreed to by Apple and the Publisher Defendants,

9

Apple would not have an economic incentive to force Random House to utilize the Agency model.

10

Instead, Apple would seek the widest possible selection of eBooks whether or not sold directly or

11

through the Agency model. In banning Random House books from its iBook store, Apple acted

12

pursuant to the conspiracy outlined above and with the purpose and intent of forcing Random House

13

to join the cartel it had helped to create and raise prices. Random House switched to the Agency

14

model effective March 1, 2011.

15

69.

The fact that Apple brokered the simultaneous switch to the Agency model, and the

16

Publisher Defendants agreed to standardize higher eBook prices, is amply demonstrated by a January

17

2010 interview in which Apple CEO Steve Jobs told Walt Mossberg of the Wall Street Journal that

18

Amazon’s $9.99 pricing for eBooks was about to end:

19

Mossberg:

Why should [a consumer] buy a book for $14.99 on
your device when she can buy one for $9.99 from
Amazon or Barnes & Noble?

21

Jobs:

That won’t be the case.

22

Mossberg:

You won’t be $14.99 or they won’t be $9.99?

23

Jobs:

The prices will be the same . . . Publishers are actually
withholding their books from Amazon because they’re
not happy. (Emphasis added.)

20

24
25
26
27
28

70.

Absent Apple’s knowledge of and participation in the unlawful conspiracy, Steve Jobs

would not have been able to predict future eBook pricing with such startling accuracy.
71.

The Publisher Defendants and Apple could not have switched to the Agency model

without a coordinated effort because eBooks are substitutes for each other. For example, if a
- 18 CLASS ACTION COMPLAINT
010260-11 467168 V1

1

consumer saw that a title listed through Apple’s iBookstore was $14.99, and was also available at

2

$9.99 if purchased through Amazon’s Kindle App, the consumer could simply just load the least

3

expensive version of the eBook title onto his eReader device. Moreover, if one publisher’s eBook

4

title was priced at $14.99, versus a comparative title available through Amazon at $9.99, there is a

5

risk that the consumer would forego the more expensive title and choose to purchase the less

6

expensive, differently titled eBook. Thus, no single major publisher would risk such loss of sales

7

and insist on the Agency model by itself. Thus, as a matter of economics, the Agency model works

8

only if there is an agreement by a significant number of publishers to the new pricing model.

9

Moreover, the shift to the Agency model occurred simultaneously and almost overnight – under any

10

definition this shift constitutes a radical, structural change to a business model that has been in

11

existence for decades.

12

72.

The anticompetitive nature of this conspiracy, and the Publisher Defendants’

13

motivation to control eBook pricing, is also revealed by the fact that certain eBooks are now priced

14

the same as – or even higher than – the price for the same titled physical book. Yet, the printing and

15

distribution costs of hardcover books are greater. Thus, absent anticompetitive motivation and

16

conduct, the difference in prices between hardcover books and eBooks would be greater. However,

17

this is often not the case as publishers are motivated to raise eBook prices to levels close to

18

hardcover books. The Amazon model was a direct threat to accelerating the decay of hardcover book

19

sales (and margins).

20

73.

Jobs and Apple would not have agreed to go to the Agency model unless they knew

21

the Publisher Defendants would not sell their eBooks through other distribution channels at lower

22

prices. Absent such an agreement, Apple could not have competed at the higher prices for eBooks if

23

it did not coordinate with the Publisher Defendants to ensure Apple was not the only eReader

24

platform agreeing to the Agency model and higher, standardized prices.

25

74.

Apple conspired with the Publisher Defendants to switch to the Agency model and

26

artificially inflate the price range of eBooks in order to cut into Amazon’s substantial share of the

27

markets for eBooks and to prevent Amazon from emerging as a serious competitor to its mobile

28

platforms for the distribution, storage and access of digital media.
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1

75.

Apple’s strategy for gaining market share at the expense of Amazon was successful.

2

According to a 2010 survey conducted by ChangeWave, between August and December 2010, the

3

iPad’s share of the U.S. eReader market rose 16 percentage points and the Kindle’s fell 15

4

percentage points.

5

76.

The trend of Apple’s increasing market share and Amazon’s declining share is

6

predicted to continue. Of the respondents in the ChangeWave survey planning on buying an eReader

7

in the next 90 days, 42 percent said they’d like an iPad, while only 33 percent said they’d opt for a

8

Kindle.

9

77.

In addition, a Credit Suisse analyst announced in February 2010 that, as a result of the

10

switch to the agency pricing model, he expected Amazon’s share of the eBooks market to fall from

11

90 percent to 35 percent over the next five years.

12

78.

The Publisher Defendants have used the pricing formula contained in the agency

13

agreements to coordinate pricing for eBooks across retailers and to restrain competition in the

14

market. For example, the prices of the following current or former bestselling eBooks are identical

15

at Amazon, Sony, Apple and Barnes & Noble: Don’t Blink (Hachette, $14.99); The Kite Runner

16

(Penguin, $12.99); Heart of the Matter (St. Martin’s Press/Macmillan, $9.99); and Best Friends

17

Forever (Simon & Schuster, $11.99).

18

79.

As a result of the unlawful anticompetitive actions alleged above, the price of eBooks

19

has soared. eBooks now often cost more than their print counterparts. For example, at Amazon.com

20

the price of The Kite Runner (Penguin) costs $12.99 in Kindle version and $8.82 as a paperback.

21

Other examples of this price discrepancy among current and former bestselling titles on

22

Amazon.com include: Don’t Blink (Hachette, $14.99 digital and $14.74 hardcover); Best Friends

23

Forever (Simon & Schuster, $11.99 digital and $10.79 paperback); Heart of the Matter (St. Martin’s

24

Press/Macmillan, $9.99 digital and $8.03 paperback); and The Art of Racing in the Rain

25

(HarperCollins, $9.99 digital and $7.99 paperback).

26
27

80.

In addition, because the price of eBooks is no longer set by the retailer, promotional

discounts and customer reward programs have effectively ended as to eBook sales.

28
CLASS ACTION COMPLAINT
010260-11 467168 V1

- 20 -

1

81.

By coordinating and entering into the above agreements, Apple and the Publisher

2

Defendants have raised, stabilized, and standardized eBook prices. Absent this anticompetitive

3

conduct, eBook prices would be lower and there would be price competition.

4

82.

The Publisher Defendants have not required an Agency model for internet sales of

5

physical books. One can see the effect of the conspiracy was to increase and standardize pricing for

6

eBooks, compared to the diverse competitive pricing for internet sales of the physical book for the

7

same title under the wholesale model.

8
9

(a)

The following is a screen capture from Amazon.com displaying standardized higher
prices for eBooks sold by the Publisher Defendants:

10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
CLASS ACTION COMPLAINT
010260-11 467168 V1

- 21 -

1

(b)

The following chart further details the standardization of supra-competitive pricing

2

effectuated by the conspiracy:
Current Amazon Prices for New York Times Bestsellers (Hardcovers, Fiction and Nonfiction)
Bestseller List Week of August 7, 2011

3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25

28

Current
Amazon
Price

Title

Author

Publisher

Nonfiction
Fiction
Nonfiction
Fiction
Fiction
Fiction
Nonfiction
Nonfiction
Fiction
Fiction
Nonfiction

BOSSYPANTS
NOW YOU SEE HER
LIES THAT CHELSEA HANDLER TOLD ME
THE BOURNE DOMINION
ONE SUMMER
BURNT MOUNTAIN
THOSE GUYS HAVE ALL THE FUN
AREA 51
SILVER GIRL
10TH ANNIVERSARY
CHELSEA CHELSEA BANG BANG

Tina Fey
James Patterson and Michael Ledwidge
Chelsea Handler
Eric Van Lustbader
David Baldacci
Anne Rivers Siddons
James Andrew Miller and Tom Shales
Annie Jacobsen
Elin Hilderbrand
James Patterson and Maxine Paetro
Chelsea Handler

Hachette
4
Hachette
5
Hachette
8
Hachette
9
Hachette
11
Hachette
12
Hachette
15
Hachette
18
Hachette
22
Hachette
31
Hachette
34
Average Hachette Price

$12.99
$12.99
$11.99
$12.99
$12.99
$12.99
$12.99
$14.99
$12.99
$14.99
$12.99
$13.26

Fiction
Fiction
Nonfiction
Nonfiction
Nonfiction
Fiction
Fiction
Nonfiction
Fiction

PORTRAIT OF A SPY
Daniel Silva
STATE OF WONDER
Ann Patchett
THROUGH MY EYES
Tim Tebow
LOST IN SHANGRI-LA
Mitchell Zuckoff
DOES THE NOISE IN MY HEAD BOTHER YOU?Steven Tyler
BEFORE I GO TO SLEEP
S. J. Watson
THE DEVIL COLONY
James Rollins
____ MY DAD SAYS*
Justin Halpern
FOLLY BEACH
Dorothea Benton Frank

HarperCollins
2
HarperCollins
8
HarperCollins
10
HarperCollins
11
HarperCollins
13
HarperCollins
16
HarperCollins
23
HarperCollins
24
HarperCollins
32
Average HarperCollins Price

$12.99
$12.99
$12.99
$12.99
$12.99
$12.99
$12.99
$9.99
$12.99
$12.66

Nonfiction
Nonfiction
Nonfiction
Fiction
Fiction
Fiction
Nonfiction

SEAL TEAM SIX
RECKLESS ENDANGERMENT
STORIES I ONLY TELL MY FRIENDS
QUINN
IRON HOUSE
SUMMER RENTAL
THE BELEIVING BRAIN

Howard E Wasdin and Stephen Templin
Gretchen Morgenson and Joshua Rosner
Rob Lowe
Iris Johansen
John Hart
Mary Kay Andrews
Michael Shermer

Macmillan
Macmillan
Macmillan
Macmillan
Macmillan
Macmillan
Macmillan
Average Macmillan

7
9
16
18
19
28
33
Price

$12.99
$12.99
$12.99
$12.99
$12.99
$12.99
$14.99
$13.28

Fiction
Fiction
Fiction
Nonfiction
Nonfiction
Nonfiction
Nonfiction
Fiction
Nonfiction
Nonfiction
Fiction

SPLIT SECOND
AGAINST ALL ENEMIES
DEAD RECKONING
CAR GUYS VS. BEAN COUNTERS
THE PSYCHOPATH TEST
ON CHINA
THE SECRET KNOWLEDGE
THE HELP*
MOONWALKING WITH EINSTEIN
IF YOU ASK ME
CALEB'S CROSSING

Catherine Coulter
Tom Clancy
Charlaine Harris
Bob Lutz
Jon Ronson
Henry Kissinger
David Mamet
Kathryn Stockett
Joshua Foer
Betty White
Geraldine Brooks

Penguin
Penguin
Penguin
Penguin
Penguin
Penguin
Penguin
Penguin
Penguin
Penguin
Penguin
Average Penguin

4
10
21
25
26
27
29
29
31
32
34
Price

$12.99
$12.99
$14.99
$12.99
$12.99
$19.99
$14.99
$9.99
$12.99
$12.99
$12.99
$13.72

Fiction
Nonfiction
Nonfiction
Fiction
Fiction
Nonfiction
Fiction
Nonfiction
Fiction
Fiction
Fiction
Nonfiction
Nonfiction
Fiction
Nonfiction
Nonfiction
Nonfiction
Fiction
Fiction
Fiction
Fiction
Fiction

A DANCE WITH DRAGONS
George R. R. Martin
UNBROKEN
Laura Hillenbrand
IN THE GARDEN OF BEASTS
Erik Larson
HAPPY BIRTHDAY
Danielle Steel
SMOKIN' SEVENTEEN
Janet Evanovich
INCOGNITO
David Eagleman
THE GIRL WHO KICKED THE HORNET'S NEST Stieg Larsson
DEMONIC
Ann Coulter
MAINE
J. Courtney Sullivan
THE PARIS WIFE
Paula McLain
STAR WARS-CHOICES OF ONE
Timothy Zahn
THE SOCIAL ANIMAL
David Brooks
THE TRIPLE AGENT
Joby Warrick
THE SILENT GIRL
Tess Gerritsen
ABSOLUTE MONARCHS
John Julius Norwich
SUPERGODS
Grant Morrison
SEX ON THE MOON
Ben Mezrich
SISTERHOOD EVERLASTING
Ann Brashares
THE LAST WEREWOLF
Glen Duncan
CONQUISTADORA
Esmeralda Santiago
DREAMS OF JOY
Lisa See
THE LAND OF PAINTED CAVES
Jean M. Auel

Random House
1
Random House
2
Random House
3
Random House
3
Random House
6
Random House
12
Random House
13
Random House
14
Random House
14
Random House
15
Random House
17
Random House
17
Random House
19
Random House
20
Random House
20
Random House
22
Random House
23
Random House
24
Random House
25
Random House
27
Random House
30
Random House
33
Average Random House Price

$14.99
$12.99
$12.99
$12.99
$12.99
$12.99
$12.99
$12.99
$12.99
$12.99
$13.99
$12.99
$13.99
$12.99
$12.99
$13.99
$12.99
$12.99
$12.99
$12.99
$12.99
$14.99
$13.31

Nonfiction
Nonfiction
Nonfiction
Fiction
Fiction
Nonfiction
Nonfiction

A STOLEN LIFE
THE GREATER JOURNEY
OF THEE I ZING
THEN CAME YOU
WORLD OF WARCRAFT: THRALL
A LOVE THAT MULTIPLIES
NOTHING DAUNTED

Jaycee Dugard
David McCullough
Laura Ingraham
Jennifer Weiner
Christie Golden
Michelle and Jim Bob Duggar
Dorothy Wickenden

Nonfiction
Nonfiction
Fiction

THE SEVEN DEADLY SINS
THE MIRACLE OF FREEDOM
TURN OF MIND

Corey Taylor
Chris Stewart and Ted Stewart
Alice LaPlante

26
27

NYT
Rank

Genre

Simon &
Simon &
Simon &
Simon &
Simon &
Simon &
Simon &
Average Simon

Schuster
Schuster
Schuster
Schuster
Schuster
Schuster
Schuster
& Schuster

1
5
6
7
26
28
35
Price

$11.99
$19.99
$11.99
$12.99
$12.99
$9.99
$12.99
$13.28

Non-Big Six
21
Non-Big Six
30
Non-Big Six
35
Average Non-Big Six Price

$9.99
$9.99
$9.99
$9.99

*The titles The Help and ____ My Dad Says are long-term bestsellers. The Help first made the list in March 2009, ____ My Dad Says in May 2010.

CLASS ACTION COMPLAINT
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1

(c)

The following are screen captures from the internet displaying examples of various

2

price levels for the same titled physical books contained in ¶ 80(a):

3

BOOK

PRICE RANGES
67 total offers. Range: $172.70. New hardcover edition.

4
Low:

5
6
7
8

Median:

9
10
11
12
13
14

High:

15
16
17
18
19

20
21

Total offers: 97. Range: $26.94. New hardcover edition.

22

Low:

23
24
25
26

27
28
CLASS ACTION COMPLAINT
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1

BOOK

2

PRICE RANGES
Median:

3
4
5
6
7

High:

8
9
10
11

12
Total Offers: 44. Range: $18.04. New hardcover edition.

13

Low:

14
15
16
17
18

Median:

19
20
21
22

High:

23
24
25
26

27
28
CLASS ACTION COMPLAINT
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1

BOOK

PRICE RANGES
Total offers: 58. Range: $39.74. New hardcover edition.

2
Low:

3
4
5
6

Median:

7
8
9
10
11
12
13

High:

14
15
16
17
18

19
20

71 total offers. Range: $19.97. New hardcover edition.

21

Low: 

22
23
24
25
26

Median:

27
28
CLASS ACTION COMPLAINT
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1

BOOK

PRICE RANGES

2
3
4
5
6

High:

7
8
9
10

11
12
13
14

83.

The simultaneous switch by the “Agency Five” publishers to the Agency model,

timed with the release of the Apple iPad, has prompted antitrust scrutiny by several sovereigns.
84.

In March 2011, European Union antitrust regulators, working closely with Britain’s

15

Office of Fair Trading, made unannounced raids on several eBook publishers in several countries.

16

According to the Associated Press, the European Commission had “reason to believe that the

17

companies concerned may have violated EU antitrust rules that prohibit cartels and other restrictive

18

business practices.”

19

85.

According to industry newsletter Publishers Lunch, the Texas Attorney General has

20

launched an inquiry that “appears to focus on pricing practices for eBooks and Apple’s entrance into

21

the [e-book] market in particular.”

22
23
24

86.

The Wall Street Journal reported that at least two major publishers, Hachette and

HarperCollins, were under scrutiny by the Texas Attorney General.
87.

Connecticut’s Attorney General has also launched an inquiry. After a preliminary

25

review, Attorney General Richard Blumenthal commented, “These agreements among publishers,

26

Amazon and Apple appear to have already resulted in uniform prices for many of the most popular

27

eBooks – potentially depriving consumers of competitive prices.”

28
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1

88.

Blumenthal also said, “Amazon and Apple combined will likely command the

2

greatest share of the retail eBook market, allowing their most-favored-nation clauses to effectively

3

set the floor prices for the most popular eBooks. Such agreements – especially when offered to two

4

of the largest eBook retail competitors in the United States – threaten to encourage coordinated

5

pricing and discourage discounting.”

6

89.

On information and belief, all of these antitrust inquiries are ongoing.

7
8
9

VII.
90.

ANTITRUST INJURY

But for Defendants’ conspiracy to restrict the price range of eBooks through the

switch to the Agency model of eBook pricing, the price of eBooks would be substantially lower than

10

their current price. Moreover, consumers would have enjoyed additional features such as

11

promotional discounts and rewards programs traditionally offered by retailers.

12
13

91.

for eBooks has been restrained.

14
15

As a direct result of Defendants’ anticompetitive actions, competition in the market

VIII. NATIONWIDE FEDERAL DIRECT PURCHASER CLASS
92.

Prior to the adoption of the Agency model, Apple, Amazon, Barnes & Noble and

16

Sony acted as resellers of eBooks through their eReaders, and they set retail prices in response to

17

unrestrained market forces. John Sargent, the CEO of Macmillan, explained this “retail model” of

18

selling e-books on his corporate blog as follows: “publishers sell to retailers, who then sell to readers

19

at a price that the retailer determines.”

20

93.

Under the Agency model, publishers set the retail prices of eBooks consumers

21

purchase and the publishers pay Amazon, Apple, Barnes & Noble and Sony a fixed commission of

22

30 percent of the retail price. John Sargent, the CEO of Macmillan explained this Agency model as

23

follows: “publishers set the price, and retailers take a commission on the sale to readers.”

24

(emphasis added).

25

94.

Under the Agency model, the “agents” – e.g., Amazon or Apple – do not set or

26

modify retail pricing. Rather under the Agency model, the Publisher Defendants are deemed to

27

control the retail sales price offered to consumers.

28
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1

95.

Under the Agency model, consumers purchase directly from the Publisher Defendants

2

a license for limited use (i.e., reading) of the eBook content. The Publisher Defendants do not sell

3

the “eBook” to Amazon or Apple, and these platforms (Apple and Amazon) do not hold title to

4

eBook content. Moreover, a physical product is not transferred from publisher to retailer or from

5

retailer to consumer. Rather, in the context of eBook “sales” under the Agency model, the Publisher

6

Defendants are selling access to the publishers’ copyrighted works directly to consumers.

7

96.

Apple’s user agreement for its iBookstore expressly acknowledges that consumers

8

directly purchased from publishers under the “Agency model,” which it has forced on all other

9

distributors of eBooks. Specifically, Apple’s user agreement states as follows:

10

Apple is acting as agent for the Publisher in providing each such
iBookstore Product to you; Apple is not a party to the transaction
between you and the Publisher with respect to that iBookstore Product;
and the Publisher of each iBookstore Product reserves the right to
enforce the terms of use relating to that iBookstore Product. The
Publisher of each iBookstore Product is solely responsible for that
iBookstore Product, the content therein, any warranties to the extent
that such warranties have not been disclaimed, and any claims that you
or any other party may have relating to that iBookstore Product or your
use of that iBookstore Product.15

11
12
13
14
15
97.

Amazon likewise makes clear in its terms and conditions that the publishers are the

16
entities who are selling use of the content to consumers:
17
For the purposes of this Agreement:
18
“Content Provider” means the party offering Digital Content in the
Kindle Store, which may be us or a third party; however, for Digital
Content designated as active content in the Kindle Store, “Content
Provider” means the publisher of the Digital Content.

19
20
21

Use of Digital Content. Upon your download of Digital Content and
payment of any applicable fees (including applicable taxes), the
Content Provider grants you a non-exclusive right to view, use, and
display such Digital Content an unlimited number of times, solely on
the Kindle or a Reading Application or as otherwise permitted as part
of the Service, solely on the number of Kindles or Other Devices
specified in the Kindle Store, and solely for your personal, noncommercial use. Unless otherwise specified, Digital Content is
licensed, not sold, to you by the Content Provider. The Content
Provider may include additional terms for use within its Digital
Content. Those terms will also apply, but this Agreement will govern

22
23
24
25
26
27
15

28

Additional iBookstore Terms and Conditions; Purchase of iBookstore Products, http://
www.apple.com/legal/itunes/us/terms.html#APPS (last visited Aug. 8, 2011).
- 28 CLASS ACTION COMPLAINT
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1

in the event of a conflict. Some Digital Content, such as Periodicals,
may not be available to you through Reading Applications.16

2
98.

When a consumer purchases an eBook for use on his or her Kindle or Kindle App,

3
Amazon displays that the price is set by the publisher if an agency agreement is in place. The
4
following screen captures demonstrate this and compares pricing between eBooks and physical
5
books:
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

16

Kindle License Agreement and Terms of Use, http://www.amazon.com/gp/help
/customer/display.html/ref=hp_rel_topic?ie=UTF8&nodeId=200506200 (last visited Aug. 8, 2011).
CLASS ACTION COMPLAINT
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1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
CLASS ACTION COMPLAINT
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1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
CLASS ACTION COMPLAINT
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1

99.

In addition, after purchasing an eBook from a publisher selling an eBook pursuant to

2

the Agency model, the confirmation of sale shows that the publisher is the entity selling the eBook

3

to the purchaser:

4
5
6
7
8
9
10
11
12
13
14

100.

Because “the price” that Plaintiffs and consumers “have paid directly is the one that

15

was unlawfully fixed,” In re ATM Fee Antitrust Litig., No. C 04-02676, 2010 U.S. Dist. LEXIS

16

97009, at *24 (N.D. Cal. Sept. 16, 2010), Plaintiffs and eBook consumers are direct purchasers of

17

eBooks.

18

101.

Because the simultaneous adoption of the Agency model represents a “conspiracy

19

among horizontal competitors at the retail level to fix retail prices,” the Supreme Court’s decision in

20

Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977) “does not prevent this garden variety price-fixing

21

claim.” State of Ariz. v. Shamrock Foods Co., 729 F.2d 1208, 1211 (9th Cir. 1984).

22

102.

Plaintiffs sue on behalf of a class of persons pursuant to Federal Rule of Civil

23

Procedure 23 under federal law. The Federal Class consists of all persons in the United States who

24

purchased eBooks published by one of the Agency 5 directly from a Publisher Defendant after the

25

adoption of the Agency model by that publisher. Excluded from the Federal Class are Defendants,

26

their employees, co-conspirators, officers, directors, legal representatives, heirs, successors and

27

wholly or partly owned subsidiaries of affiliated companies.

28
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1

103.

The persons in the Class are so numerous that individual joinder of all members is

2

impracticable under the circumstances of this case. Although the precise number of such persons is

3

unknown, the exact size of the Class is easily ascertainable, as each Class member can be identified

4

by using Defendants’ records and/or the records of its distributors or retailers. Plaintiffs are

5

informed and believe that there are many thousands of Class members.

6
7

104.

over any questions affecting individual members, including:

8
9
10

(a)

Whether Defendants unlawfully contracted, combined and conspired to

unreasonably restrain trade in violation of section 1 of the Sherman Act by agreeing to switch to the
Agency model of eBook pricing and by agreeing to restrict the price range of eBooks;

11
12

There are common questions of law and fact specific to the Class that predominate

(b)

Whether Defendants’ actions in entering the agency agreements alleged above

violated California law;

13

(c)

Whether consumers and Class members have been damaged by Defendants’

15

(d)

Whether punitive damages are appropriate;

16

(e)

Whether Defendants should disgorge unlawful profits;

17

(f)

The amount of any damages; and

18

(g)

The nature and scope of injunctive relief necessary to restore a competitive

14

19
20

conduct;

market.
105.

Plaintiffs’ claims are typical of the Class’ claims, as they arise out of the same course

21

of conduct and the same legal theories as the rest of the Class, and Plaintiffs challenge the practices

22

and course of conduct engaged in by Defendants with respect to the Class as a whole.

23
24
25

106.

Plaintiffs will fairly and adequately protect the interests of the Class. Plaintiffs have

retained Class Counsel who are able and experienced class action litigators.
107.

Resolution of this action on a class-wide basis is superior to other available methods

26

and is a fair and efficient adjudication of the controversy because in the context of this litigation, no

27

individual class member can justify the commitment of the large financial resources to vigorously

28

prosecute a lawsuit against Defendants. Separate actions by individual class members would also
- 33 CLASS ACTION COMPLAINT
010260-11 467168 V1

1

create a risk of inconsistent or varying judgments, which could establish incompatible standards of

2

conduct for Defendants and substantially impede or impair the ability of Class Members to pursue

3

their claims. A class action also makes sense because Defendants have acted and refused to take

4

steps that are, upon information and belief, generally applicable to thousands of individuals, thereby

5

making injunctive relief appropriate with respect to the Class as a whole.

6
7

IX.
108.

NATIONWIDE CALIFORNIA LAW CLASS

Upon information and belief, the unlawful course of conduct alleged above was

8

created, adopted, ratified and/or implemented at the corporate headquarters of Apple located in

9

Cupertino, California and a substantial part of the anticompetitive conduct took place in California.

10
11
12
13
14

109.

Communications between publishers were conducted utilizing Apple, a California

corporation, as an intermediary.
110.

One of the chief architects of the unlawful conspiracy, Steve Jobs, is a resident of

California and the CEO of Apple computers.
111.

Apple has acknowledged that California law applies to it nationwide with respect to

15

the sale and purchase of eBooks. Specifically, Apple’s iBookstore terms and condition provide that

16

“[a]ll transactions on the App and Book Services are governed by California law, without giving

17

effect to its conflict of law provisions.” Apple’s iBookstore terms and conditions also provide that

18

“any claim or dispute with Apple or relating in any way to your use of the App and Book Services

19

resides in the courts in the State of California.”

20

112.

Plaintiffs sue on behalf of a nationwide California law class of persons pursuant to

21

Federal Rule of Civil Procedure 23. The California Law Class consists of all persons in the United

22

States who purchased eBooks published by one of the “Agency Five” publishers after the adoption of

23

the Agency Model by that publisher. Excluded from the California Law Class are Defendants, their

24

employees, co-conspirators, officers, directors, legal representatives, heirs, successors and wholly or

25

partly owned subsidiaries of affiliated companies.

26
27
28

X.
113.

INDIRECT PURCHASER CLASS ACTION ALLEGATIONS

In the event Plaintiffs are not a direct purchaser and the Court determines that

California law does not apply nationwide, plaintiff brings the following class allegations.
- 34 CLASS ACTION COMPLAINT
010260-11 467168 V1

1

114.

Plaintiffs also brings this action on their own behalf and as a class action pursuant to

2

Rule 23 of the Federal Rules of Civil Procedure and/or respective state statute(s), on behalf of all

3

members of the following classes (collectively, the “State Classes”) with respect to claims under the

4

antitrust statutes of each of the following jurisdictions:17

5

(a)

6

Defendant after the Agency model pricing was adopted.

7

(b)

8
(c)

10

District of Columbia: All persons who purchased an eBook published by a
Publisher Defendant after the Agency model pricing was adopted.

11

(d)

12

Florida: All persons who purchase an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

13

(e)

14

Hawaii: All persons who purchased an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

15

(f)

16

Illinois: All persons who purchased an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

17

(g)

18

Iowa: All persons who purchased an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

19

(h)

20

Kansas: All persons who purchased an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

21

(i)

22

Maine: All persons who purchased an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

23

(j)

24

Michigan: All persons who purchased an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

25

(k)

Minnesota: All persons who purchased an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

26

28

California: All persons who purchased an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

9

27

Arizona: All persons who purchased an eBook published by a Publisher

17

A demand letter will be sent under Massachusetts law and an amendment adding claims
under Massachusetts law will be made in 30 days if necessary.
CLASS ACTION COMPLAINT
010260-11 467168 V1

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1

(l)

2
3

Defendant after the Agency model pricing was adopted.
(m)

4
5

(n)

(o)

(p)

(q)

(r)

(s)

(t)

(u)

(v)

(w)

28

South Dakota: All persons who purchased an eBook published by a
Publisher Defendant after the Agency model pricing was adopted.

(x)

Tennessee: All persons who purchased an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

26
27

South Carolina: All persons who purchased an eBook published by a
Publisher Defendant after the Agency model pricing was adopted.

24
25

Oregon: All persons who purchased an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

22
23

North Dakota: All persons who purchased an eBook published by a
Publisher Defendant after the Agency model pricing was adopted.

20
21

North Carolina: All persons who purchased an eBook published by a
Publisher Defendant after the Agency model pricing was adopted.

18
19

New York: All persons who purchased an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

16
17

New Mexico: All persons who purchased an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

14
15

New Hampshire: All persons who purchased an eBook published by a
Publisher Defendant after the Agency model pricing was adopted.

12
13

Nevada: All persons who purchased an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

10
11

Nebraska: All persons who purchased an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

8
9

Montana: All persons who purchased an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

6
7

Mississippi: All persons who purchased an eBook published by a Publisher

(y)

Utah: All persons who purchased an eBook published by a Publisher

Defendant after the Agency model pricing was adopted.
- 36 CLASS ACTION COMPLAINT
010260-11 467168 V1

1

(z)

2

Vermont: All persons who purchased an eBook published by a Publisher
Defendant after the Agency model pricing was adopted.

3

(aa)

4

West Virginia: All persons who purchased an eBook published by a
Publisher Defendant after the Agency model pricing was adopted.

5

(bb)

Wisconsin: All persons who purchased an eBook published by a Publisher

6

Defendant after the Agency model pricing was adopted.

7

FIRST CAUSE OF ACTION

8

VIOLATION OF THE SHERMAN ACT
(15 U.S.C. § 1)

9
115.

Each of the foregoing allegations is incorporated in this claim for relief.

116.

Plaintiffs do not believe it is necessary to prove a relevant market. To the extent one

10
11
is required, the relevant product market is eBooks.
12
117.

To the extent required the relevant geographic market is the entire United States.

118.

Defendants by and through their officers, directors, employees, agents and other

13
14
representatives have entered into an unlawful agreement, combination and conspiracy in restraint of
15
trade. Specifically, Defendants have unlawfully agreed to artificially inflate the retail price range of
16
eBooks by switching to an Agency model in which eBook prices are determined using a common
17
formula across individual books and publishers. These unlawful agreements have unreasonably
18
restrained price competition among retailers for eBook sales.
19
119.

Plaintiffs and the Class members have been injured and will continue to be injured in

20
their businesses and property by paying more for eBooks than they would have paid or would pay in
21
the future in the absence of Defendants’ unlawful acts.
22
120.

Plaintiffs and Class members are direct purchasers because the Publisher Defendants

23
set the retail price for eBooks, and Amazon, Apple and other eBook distributers are acting only as
24
agents.
25
121.

Plaintiffs and the Class are entitled to an injunction that terminates the ongoing

26
violations alleged in this Complaint.
27
28
CLASS ACTION COMPLAINT
010260-11 467168 V1

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1

SECOND CAUSE OF ACTION

2

VIOLATION OF THE CARTWRIGHT ACT
(California Business & Professions Code §§ 16720, et seq.)

3
122.

Plaintiffs incorporate by reference the allegations in the above paragraphs as if fully

4
set forth herein. This claim is asserted by the nationwide California class and/or as a subclass if the
5
Court rules California law does not apply nationwide.
6
123.

Since 2010 and up to the present time, Defendants conspired, and agreed and continue

7
to combine, conspire and agree to unreasonably restrain the market for eBooks, in violation of
8
California Business and Professions Code sections 16720, et seq., by signing the agency agreements
9
as alleged above.
10
124.

As a direct consequence of the agreements, competition in the market eBooks has

11
been restrained, suppressed and eliminated. Class members have been deprived of the benefit of a
12
free, competitive marketplace for eBooks.
13
THIRD CAUSE OF ACTION
14
15
16
17
18

VIOLATIONS OF STATE ANTITRUST AND RESTRAINT OF TRADE LAWS AND
CONSUMER PROTECTION STATUTES
125.

Plaintiffs incorporate by reference the allegations in the above paragraphs as if fully

set forth herein.
126.

For each of the states set forth below, a significant volume of intrastate commerce was

19

impacted by Defendants’ illegal conduct as alleged above. That is, purchases of eBooks occurred in

20

each of the states at supra-competitive prices due to Defendants’ illegal conduct.

21

127.

22

§§ 44-1401, et seq.

23

128.

24
25
26
27
28

By reason of the foregoing, Defendants have violated Arizona Revised Statutes,

By reason of the foregoing, Defendants have violated California Business and

Professions Code, §§ 16700, et seq.
129.

By reason of the foregoing, Defendants have violated District of Columbia Code

Annotated §§ 28-4501, et seq.
130.

By reason of the foregoing, Defendants have violated the Florida Deceptive and

Unfair Trade Practices Act, Fla. Stat. §§ 501.201, et seq.
- 38 CLASS ACTION COMPLAINT
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1
2
3
4

131.

By reason of the foregoing, Defendants have violated Hawaii Revised Statutes

Annotated §§ 480-1, et seq.
132.

By reason of the foregoing, Defendants have violated the Illinois Antitrust Act,

Illinois Compiled Statutes, §§ 740 Ill. Comp. Stat. 10/1, et seq.

5

133.

By reason of the foregoing, Defendants have violated Iowa Code §§ 553.1, et seq.

6

134.

By reason of the foregoing, Defendants have violated Kansas Statutes Annotated,

7

§§ 50-101, et seq.

8

135.

9
10
11

By reason of the foregoing, Defendants have violated the Maine Revised Statutes, 10

M.R.S. §§ 1101, et seq.
136.

By reason of the foregoing, Defendants have violated Michigan Compiled Laws

Annotated §§ 445.773, et seq.

12

137.

13

§§ 325D.49, et seq.

14

138.

15

§§ 75-21-1, et seq.

16

139.

17

By reason of the foregoing, Defendants have violated Minnesota Annotated Statutes

By reason of the foregoing, Defendants have violated Mississippi Code Annotated

By reason of the foregoing, Defendants have violated Montana’s Unfair Trade

Practices and Consumer Protection Act of 1970, Mont. Code, §§ 30-14-103, et seq.

18

140.

19

§§ 59-801, et seq.

20

141.

21
22
23
24
25

By reason of the foregoing, Defendants have violated Nebraska Revised Statutes

By reason of the foregoing, Defendants have violated Nevada Revised Statutes

Annotated §§ 598A.010, et seq.
142.

By reason of the foregoing, Defendants have violated New Mexico Statutes

Annotated §§ 57-1-1, et seq.
143.

By reason of the foregoing, Defendants have violated New Hampshire Revised

Statutes §§ 356:1, et seq.

26

144.

By reason of the foregoing, Defendants have violated New York General Business

27

Laws §§ 340, et seq.

28
CLASS ACTION COMPLAINT
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- 39 -

1
2

145.

§§ 75-1, et seq.

3
4

By reason of the foregoing, Defendants have violated North Carolina General Statutes

146.

By reason of the foregoing, Defendants have violated North Dakota Century Code

§§ 51-08.1-01, et seq.

5

147.

6

§§ 646.705, et seq.

7

148.

8

By reason of the foregoing, Defendants have violated Oregon Revised Statutes

By reason of the foregoing, Defendants have violated South Carolina’s Unfair Trade

Practices Act, S.C. Code Ann. §§ 39-5-10, et seq.

9

149.

10

§§ 37-1-3.1, et seq.

11

150.

12

By reason of the foregoing, Defendants have violated South Dakota Codified Laws

By reason of the foregoing, Defendants have violated Tennessee Code Annotated

§§ 47-25-101, et seq.

13

151.

14

911, et seq.

15

152.

By reason of the foregoing, Defendants have violated Vermont Stat. Ann. 9 §§ 2453,

153.

By reason of the foregoing, Defendants have violated West Virginia Code §§ 47-18-1,

154.

By reason of the foregoing, Defendants have violated Wisconsin Statutes §§ 133.01,

155.

As a direct and proximate result of Defendants’ unlawful conduct, Class Members in

16

et seq.

17
18

et seq.

19
20
21

By reason of the foregoing, Defendants have violated Utah Code Annotated §§ 76-10-

et seq.

22

each of these states have been injured in their businesses and property in that they paid more for

23

eBooks than they would have paid absent the Defendants’ unlawful conduct.

24

FOURTH CAUSE OF ACTION

25

VIOLATION OF THE UNFAIR COMPETITION ACT
(California Business & Professions Code §§ 17200, et seq.)

26
156.

Plaintiffs incorporate by reference the allegations in the above paragraphs as if fully

27
set forth herein.
28
CLASS ACTION COMPLAINT
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1

157.

Defendants have engaged in and are still engaged in acts of unfair competition, as

2

defined in California Business and Professions Code sections 17200, et seq., including but not

3

limited to violation of California Business and Professions Code sections 16720, et seq., as alleged

4

above.

5

FIFTH CAUSE OF ACTION

6

UNJUST ENRICHMENT

7
8
9

158.

Plaintiffs incorporate by reference the allegations in the above paragraphs as if fully

set forth herein.
159.

To the detriment of Plaintiffs and members of the Class, Defendants have been and

10

continue to be unjustly enriched as a result of the unlawful and/or wrongful conduct. Defendants

11

have unjustly benefited through the sale of eBooks at an inflated, anticompetitive monopoly price to

12

consumers.

13

160.

Between the parties, it would be unjust for Defendants to retain the benefits attained

14

by their actions. Accordingly, Plaintiffs and members of the Class seek full restitution of

15

Defendants’ enrichment, benefits and ill-gotten gains acquired as a result of the unlawful and/or

16

wrongful conduct alleged herein.

17
18

JURY TRIAL DEMANDED
161.

Plaintiffs hereby demand a trial by jury of all the claims asserted in this Complaint. .

19

PRAYER FOR RELIEF

20

WHEREFORE, Plaintiffs pray for judgment against Defendants as follows:

21

A.

Certification of the action as a Class Action pursuant to the Federal Rule of Civil

22

Procedure 23, and appointment of Plaintiffs as Class Representatives and their counsel of record as

23

Class Counsel;

24
25

B.

A declaration that Defendants’ conduct constituted a conspiracy and that Defendants

are liable for the conduct or damage inflicted by any other co-conspirator;

26

C.

A declaration that the pricing formula contained in the agency agreements described

27

above is unlawful;

28

D.

Restitution and/or damages to Class members for the purchase of eBooks;
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