A class action suit against Apple and several book publishers claims the companies engaged in anticompetitive behavior that caused ebook prices to rise and force intense competition between Apple and Amazon over digital content.

The lawsuit claims that the companies fixed e-book prices to boost profits and force Amazon to raise prices for its e-books. It comes at a time when Apple has started taking a cut of sales for digital content made via iOS apps, with content sellers distancing themselves from Apple as a result.

?The suit is a result of all of these different actions by Apple wanting to generate a revenue stream beyond the hardware or the immediate transaction in an app,? said Jeff Orr, group research director for mobile devices, ABI Research, New York. ?They want to have a role in any recurring revenue opportunities.

?Amazon has similar aspirations and they?ve beefed up their content library and are now offering TV and video,? he said. ?Amazon is continuing to build its content access and distribution abilities and is not locking themselves into a particular brand of devices.?

Besides Apple, the suit claims that Hachette, Simon & Schuster, Macmillan, HarperCollins and Penguin were also involved in the price fixing.

The suit was filed by the law firm Hagens Berman on behalf of Anthony Petru and Marcus Mathis.

High stakes
Apple?s reasons for wanting to increase the price of ebooks include a fear that Amazon could be a threat to Apple?s business model if the online retailer extended the Kindle to distribute other media, according to the suit.

The suit follows recent moves by Apple to take a cut of any digital content sales made via apps for its devices, such as Amazon?s Kindle app for the iPhone and iPad.

Amazon and other content sellers removed in-app purchasing in response.

Amazon also this week launched an HTML5 browser-based Kindle app that is optimized for the iPad. Because it is browser based, the app can sell content without Amazon having to give a cut to Apple.

The suit reflects how high the stakes are in digital content sales.

?The using of legal resources to pursue intellectual property and rights and ownership of technology is not going to take place unless there is money to be had,? Mr. Orr said. ?You wouldn?t have seen this suit a couple of years ago because there wasn?t a lot of competition for the distribution of electronic books.?

The suit claims a new pricing strategy for ebooks that was introduced when Apple launched the iPad caused prices for ebooks to increase and guaranteed that the publishes would not sell ebooks at lower prices elsewhere, such as Amazon.

Ebook technology
The iPad was launched with the five publishers named in the suit agreeing to provide content through the iBookstore using a business model that lets them set the price that customers pay for e-books. Ebooks sell for between $12.99 and $14.99 and Apple keeps a percentage of each sale.

Previously, Amazon, a leader in the ereader market with its Kindle device, had offered most new releases and best sellers at $9.99. Today, many of these books are offered at $12.99.

?The intended effect of this agreement was to force Amazon to abandon its discount pricing of eBooks and allow the Publisher Defendants to establish uniformly higher prices for new release eBooks,? the suit said.

The suit claims that Amazon?s discount pricing strategy for ebooks threatened the sale of higher priced physical books and that publishers feared Amazon would use its market power to reduce their profit margins.

Additionally, the suit says that publishers realized they had to coordinate an effort to force Amazon to abandon its pricing strategy because if any one of them tried alone they risked losing sales in their fastest growing market, ebooks.

The book publishers colluded with Apple because they feared that ebook technology could threaten sales of print books, according to the suit.

The plaintiffs will likely face challenges proving their allegations.

?Price fixing is something that has to be proven,? Mr. Orr said. ?They also have to prove that these publishers worked with Apple to make prices higher ? that obviously is a little tricky to do because it requires showing the intent of different publishers.?

However, if the allegations can be proven, the courts generally do not condone price fixing.

?I think what has to be examined is is this good for the industry. If certain leading publishers work together to increase prices to be able to generate more money for themselves and to reduce competition, those are things that courts have typically shown to be not acceptable,? Mr. Orr said.

Prices remain steady
It could be years before there is any outcome in the suit.

?The defendants, Apple and the publishers, will probably move to dismiss the complaint,? said Jason Koslofsky, an attorney with ArentFox LLP, Washington, DC. ?If the lawsuit survives dismissal, it could end in settlement or perhaps go to trial.

?It will likely last several years,? he said.

Despite the suit, ebook prices are likely to stay where they are for the foreseeable future.

?Apple and the publishers might have to change practices depending on the result of the lawsuit, but in the meantime they are unlikely to do anything differently regarding pricing e-books,? Mr. Koslofsky said.

?If e-book pricing becomes more flexible as a result of the lawsuit, it could lead Amazon to underprice certain titles to generate sales,? he said.

?Amazon has underpriced Apple on digital music to entice consumers to shop Amazon instead of iTunes. The result could be cheaper e-books for consumers.?

Final Take
Chantal Tode is associate editor on Mobile Marketer, New York