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Summary:

The decision by major publishers to strike a pricing deal with Apple (NSDQ: AAPL) has been the source of speculation and several antitrust i…

Top Secret Envelope
photo: Corbis / Harry Choi

The decision by major publishers to strike a pricing deal with Apple (NSDQ: AAPL) has been the source of speculation and several antitrust investigations. Now, a new court filing suggests someone inside the industry was leaking the publishers’ pricing strategy.

In a brief filed in New York federal court this week, law firm Grant & Eisenhofer said it should get to represent consumers because it has special knowledge about how the scheme took place. The filing reads in part:

G&E has been investigating this case since we were approached through counsel by an industry source in March 2011. This source provided detailed knowledge from his years in the industry that further spurred our investigation

The filing is significant because, until now, allegations that the publishers colluded with Apple to fix book prices has been based on speculation from public sources, in particular a January 2010 article in which Steve Jobs told a Wall Street Journal (NSDQ: NWS) reporter that publishers were “unhappy.”

The insider’s information might mean that the law firm will have an easier time proving an actual conspiracy took place. The insider is also mentioned in another filing this week by a lawyer from a different, Washington-based law firm. It refers to “an in-person meeting, which I attended, with a very knowledgeable and important confidential source.”

This week’s filings came in the context of different law firms jockeying over who will get to play lead violin in a series of nearly 30 nation-wide class action suits. The cases, some of which also name Amazon (NSDQ: AMZN) and Barnes & Noble (NYSE: BKS) as part of the conspiracy, were recently consolidated before a federal judge in Manhattan.

The litigation process will likely take years. Meanwhile, Apple and the publishers are also being investigated by the Justice Department, state attorneys general and European authorities.

The law firms tied to the confidential source did not immediately return email requests for comment. Readers, if you have any idea as to the identify of the “important, confidential source,” please send on your thoughts to me or my publishing reporter colleague, Laura Owen.

  1. Let me preview Apple’s defense:

    This is exactly the same approach we took with pricing songs for iTunes.    We found a price that worked for each of the major publishers and worked with each of them to end at $9.99 for consistency in our store.

    We did not collude to set the prices of books in the Amazon Store, the B&N store, the Google store and so forth.

    There is no crime here.   Merely good business negotiation tactics as one of many competitors in a crowded space.

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    1. There is a lot more to the story. Amazon initially sold ebooks under a wholesale model, where publishers sold them to Amazon for a price, and Amazon could set its own price to end users, even if that price was lower than the wholesale price.

      When Apple entered the ebook market, Apple worked with the publishers to adopt an “agency model” and force vendors to sell ebooks at prices set by the publisher rather than the eseller. Apple’s market power was enough to force Amazon to give in to the publishers and adopt this model as well. I’m not familiar enough with anti-trust law to know if they crossed a line, but I don’t know that things are as clear-cut as you make them sound.

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    2. Except that’s the opposite of what happened. Amazon was the one trying to standardize 9.99 as the price for new e-books. Apple worked with the publishers to implement the agency model, where the publishers were able to set whatever price they wanted.

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  2. Amazon’s pricing strategy is to give away the razor handle and sell the blades.  Hence they can sell Kindle’s including the new Fire at a loss.

    Ignore all the reports they are selling the Fire at cost.  Those morons don’t understand that products sell for far above the price of the parts because real businesses have to cover the cost of sales & marketing, general overhead, support, and so on.

    Amazon’s strategy is to seed the market with low cost devices so that consumers will buy their overpriced content.

    Apple’s strategy is to sell world class products at a profit and make a small profit on every piece of content.

    Apple didn’t force Amazon to do anything.  They simply called the bluff on their strategy.

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  3. Amazon chooses the price every book sells for to optimize profits for Amazon.  Amazon’s prices are all over the map depending on what price will drive the most volume in their opinion.  Many higher end publishers won’t touch Amazon because of this.

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  4. Why do you keep calling it a conspiracy if a publisher tipped the law firms? It’s not much of a “conspiracy” when someone from the inside confirms it, is it?

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  5. Steve, if Amazon set their prices “all over the map”, then why do they place
    This price was set by the publisher right underneath the price?

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  6. Before Apple/publisher price fixing I bought an ebook for 4.39. After the price fixing, the same ebook is now 8.99.

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