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eBooks Complaint, Petru v. Apple et al

eBooks Complaint, Petru v. Apple et al

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Published by Jordan Golson
ANTHONY PETRU and MARCUS MATHIS, Individually and on Behalf of All Others Similarly Situated,
Plaintiffs,
v.
APPLE INC.; HACHETTE BOOK GROUP, INC.; HARPERCOLLINS PUBLISHERS, INC.; MACMILLAN PUBLISHERS, INC; PENGUIN GROUP (USA) INC.; and SIMON & SCHUSTER, INC.,
Defendants.

Initial Complaint
ANTHONY PETRU and MARCUS MATHIS, Individually and on Behalf of All Others Similarly Situated,
Plaintiffs,
v.
APPLE INC.; HACHETTE BOOK GROUP, INC.; HARPERCOLLINS PUBLISHERS, INC.; MACMILLAN PUBLISHERS, INC; PENGUIN GROUP (USA) INC.; and SIMON & SCHUSTER, INC.,
Defendants.

Initial Complaint

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Published by: Jordan Golson on Aug 09, 2011
Copyright:Attribution Non-commercial

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03/14/2012

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010260-11 467168 V1
 
12345678910111213141516171819202122232425262728Jeff D. Friedman (173886)Shana Scarlett (217895)HAGENS BERMAN SOBOL SHAPIRO LLP715 Hearst Avenue, Suite 202Berkeley, California 94710Telephone: (510) 725-3000Facsimile: (510) 725-3001 jefff@hbsslaw.comshanas@hbsslaw.comSteve W. BermanHAGENS BERMAN SOBOL SHAPIRO LLP1918 Eighth Avenue, Suite 3300Seattle, WA 98101Telephone: (206) 623-7292Facsimile: (206) 623-0594steve@hbsslaw.comAttorneys for Plaintiffs
[Additional counsel listed on signature page]
UNITED STATES DISTRICT COURTNORTHERN DISTRICT OF CALIFORNIAANTHONY PETRU and MARCUS MATHIS,Individually and on Behalf of All OthersSimilarly Situated,Plaintiffs,v.APPLE INC.; HACHETTE BOOK GROUP,INC.; HARPERCOLLINS PUBLISHERS, INC.;MACMILLAN PUBLISHERS, INC; PENGUINGROUP (USA) INC.; and SIMON &SCHUSTER, INC.,Defendants.No.CLASS ACTIONCOMPLAINT
JURY TRIAL DEMANDED
 
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i -
010260-11 467168 V1
 
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CLASS ACTION COMPLAINT
TABLE OF CONTENTS
I.
 
INTRODUCTION ..................................................................................................................... 1
 
II.
 
PARTIES ................................................................................................................................... 4
 
III.
 
JURISDICTION AND VENUE ................................................................................................ 5
 
IV.
 
MARKET POWER OVER EBOOK SALES ........................................................................... 6
 
V.
 
STRUCTURE OF THE INDUSTRY ........................................................................................ 9
 
VI.
 
UNLAWFUL AGREEMENT TO RESTRAIN TRADE OR COMMERCE ......................... 10
 
VII.
 
ANTITRUST INJURY ............................................................................................................ 27
 
VIII.
 
NATIONWIDE FEDERAL DIRECT PURCHASER CLASS ............................................... 27
 
IX.
 
NATIONWIDE CALIFORNIA LAW CLASS ....................................................................... 34
 
X.
 
INDIRECT PURCHASER CLASS ACTION ALLEGATIONS............................................ 34
 
FIRST CAUSE OF ACTIONVIOLATION OF THE SHERMAN ACT (15 U.S.C. § 1) ..................................................... 37
 
SECOND CAUSE OF ACTIONVIOLATION OF THE CARTWRIGHT ACT(California Business & Professions Code §§ 16720,
et seq
.) .................................................. 38
 
THIRD CAUSE OF ACTIONVIOLATIONS OF STATE ANTITRUST AND RESTRAINT OF TRADELAWS AND CONSUMER PROTECTION STATUTES ...................................................... 38
 
FOURTH CAUSE OF ACTIONVIOLATION OF THE UNFAIR COMPETITION ACT(California Business & Professions Code §§ 17200,
et seq
.) .................................................. 40
 
FIFTH CAUSE OF ACTIONUNJUST ENRICHMENT ....................................................................................................... 41
 
JURY TRIAL DEMANDED .............................................................................................................. 41
 
PRAYER FOR RELIEF ...................................................................................................................... 41
 
 
 -
 
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010260-11 467168 V1
 
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CLASS ACTION COMPLAINT
Plaintiffs, by and through their attorneys, based on their individual experiences, theinvestigation of counsel, and information and belief allege as follows:
I.
 
INTRODUCTION
1.
 
In November 2007, Amazon revolutionized the book publishing industry by releasingthe Kindle, a handheld digital reader for electronic books or “eBooks.” Using proprietary “electronicink” technology, the Kindle replicated the appearance of ink on paper and introduced numerousefficiency-enhancing characteristics, including portability and other advantages of a digital format.A major economic advantage to eBook technology is its potential to massively reduce distributioncosts historically associated with brick-and-mortar publishing. But publishers quickly realized that if market forces were allowed to prevail too quickly, these efficiency enhancing characteristics wouldrapidly lead to lower consumer prices, improved consumer welfare, and threaten the current businessmodel and available surplus (profit margins). So, faced with disruptive eBook technology thatthreatened their inefficient and antiquated business model, several major book publishers, workingwith Apple Inc. (“Apple”), decided free market competition should not be allowed to work – togetherthey coordinated their activities to fight back in an effort to restrain trade and retard innovation. Thelargest book publishers and Apple were successful.2.
 
The original Kindle sold out in less than six hours. To gain market share, takeadvantage of its first-mover advantage, and capitalize on the tremendous efficiencies associated witheBooks, Amazon set eBook pricing levels significantly below prices for physical books (“paperbooks” or “hardcover books”). Amazon set the prices of many of the popular new released eBook titles at $9.99. Amazon instituted this pro-consumer, discounted pricing even though on many titlespublishers charged Amazon a wholesale price at or above $9.99.3.
 
Even though publishers were reaping the benefits of Amazon’s successful efforts tovastly expand the consumer base and increase volume of units sold via Amazon’s investment ineBook sales, publishers also feared Amazon’s $9.99 pricing. Amazon’s discount pricing threatenedto disrupt the publishers’ long-established brick-and-mortar model faster than the publishers werewilling to accept. Being hidebound and lacking innovation for decades, the publishers wereparticularly concerned that Amazon’s pro-consumer pricing of eBooks would negatively impact their

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