Amazon hit with class action antitrust lawsuit claiming it colluded with major publishers to illegally drive up ebook prices by 30% (AMZN)

GettyImages 151364869 SANTA MONICA, CA - SEPTEMBER 6: Amazon CEO Jeff Bezos holds up the new Kindle Fire HD reading device in two sizes during a press conference on September 6, 2012 in Santa Monica, California. Amazon unveiled the Kindle Fire HD in 7 and 8.9-inch sizes, with prices starting at $199. (Photo by David McNew/Getty Images)

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Several ebook customers on Thursday
filed a lawsuit
against Amazon accusing it of violating
antitrust laws by illegally colluding with the “big five”
publishing houses to drive up the prices of ebooks.

The lawsuit alleged that Amazon entered into anticompetitive
pricing agreements in 2015 with Hachette, HarperCollins, Macmillan,
Penguin Random House, and Simon & Schuster that allowed the
companies to artificially increase prices by as much as 30%.

Amazon, which controlled 89% of the ebook market as of 2018,
according to a
analysis cited in the suit, then used its dominance
to benefit from those prices hikes by charging consumers more.

“Time and again, Amazon’s response to competition is not to
compete on a level playing field, but to try to eliminate the
competition – and that’s not how things are supposed to work,”
Steve Berman, managing partner of Hagens Berman, the law firm that
brought the suit, told Business Insider in a press release.

Amazon and Hachette declined to comment. The other publishers
did not respond to requests for comment.

The lawsuit alleged that Amazon illegally inflated prices using
a tactic called as “pricing parity,” which relies on
“most-favored-nation” clauses. MFNs are, in the business context,
agreements between buyers and sellers that ensure a buyer gets as
good of a deal on that seller’s products as any other buyer in the

But the lawsuit — similar to previous investigations by
lawmakers in the US and EU — accused Amazon of using MFNs to
instead prevent publishers from selling their ebooks to consumers
at a lower price on websites that compete with Amazon.

“Amazon’s behavior is astonishingly brazen, especially in light
of past litigation and recent government actions in the US and
abroad,” Berman said.

The EU
reached an agreement with Amazon
in 2015 over its use of MFNs,
saying at the time that the practice “may have made it more
difficult for other e-book platforms to innovate and compete
effectively with Amazon.” That agreement barred the practice for
five years, but only in the EU.

In its
landmark antitrust report
in October 2020, the House Judiciary
Committee also slammed Amazon over the issue, saying: “Amazon has a
history of using MFN clauses to ensure that none of its suppliers
or third-party sellers can collaborate with an existing or
potential competitor to make lower-priced or innovative product
offerings available to consumers.”

Amazon previously used a similar pricing tactic to prevent other

third-party sellers
on its online marketplace from charging
customers more on competing sites, ending the practice in March
2019 amid heightened antitrust scrutiny.

The scheme Amazon and the big five publishers are accused of
employing isn’t new to the ebook industry, either.

In 2013, a federal court ruled that
Apple illegally colluded with the same publishers
to raise the
prices of ebooks, sending the price skyrocketing virtually
overnight, and the company eventually had to pay a
$450 million penalty

The court also barred publishers from colluding with each other
or using MFNs for five years. According to Thursday’s lawsuit, that
led to lower ebook prices in 2013 and 2014, before Amazon’s
renegotiated deals in 2015 caused prices to surge again.

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The lawsuit, filed in the Southern District of New York, is
seeking class-action status, and the plaintiffs are asking the
court to reimburse consumers who were overcharged by Amazon
competitors as a result of the alleged price-fixing as well as
force Amazon and the publishers to abandon the practice.

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Amazon hit with class action antitrust lawsuit claiming it
colluded with major publishers to illegally drive up ebook prices
by 30% (AMZN)