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Amazon, Publishers Face Class-Action Suit Over E-book ‘Monopoly’

February 20, 2013

Amazon Kindle

A trio of independent bookstores this week filed a class-action lawsuit against Amazon its largest publishing partners over their use of digital rights management (DRM) technology to create what the plaintiffs claim is a monopoly on the sale of e-books in the United States.

Along with Amazon, the "Big Six" publishing houses—Random House, Penguin, Hachette, HarperCollins, Simon & Schuster, and Macmillan—are named in the suit, according the Huffington Post, which published a copy of the class-action complaint on Wednesday.

Last Friday, Albany, N.Y.-based Book House of Stuyvesant Plaza, Greenville, S.C.-based Fiction Addiction, and New York City-based Posman Books filed the suit in New York on behalf of "all independent brick-and-mortar bookstores who sell e-books," the Huffington Post reported.

At issue are the DRM locks Amazon places on e-books purchased for its Kindle e-readers which prevent users from transferring their purchase to another e-reading device like the Barnes & Noble Nook or another computing platform entirely. The major publishers named in the suit all utilize Amazon's AZW DRM on e-books they sell through Amazon, though two of Macmillian's imprints, Tor and Forge, do not, according to the news site.

The independent book sellers who brought the complaint claim that none of the Big Six publishers have entered into an agreement with any U.S.-based independent bookstore to sell e-book versions of titles they publish, essentially giving Amazon, and to a lesser extent Barnes & Noble and Apple, a monopoly position in the e-book market relative to the independents.

The stakes are high for the independents, the suit claims, because the Big Six publishing houses bring in 60 percent of all revenue generated from sales of print books in the U.S. and 85 percent of all revenue generated from the sale of books listed on the New York Times Bestseller list, while Amazon controls a 60 percent share of the U.S. e-book market and enjoys exclusive distribution deals with the largest publishers.

Barnes & Noble has an additional 27 percent share of the e-book market while Apple's iBookstore accounts for less than 10 percent of digital book sales, the suit stated.

Meanwhile, independent booksellers have essentially been squeezed out of the growing market for e-books due to their lack of e-book distribution deals with the largest publishers and their inability to transfer DRM-protected titles to other e-readers and computing devices for resale.

The plaintiffs are seeking the elimination of DRM restrictions on Amazon-distributed e-books and possibly the establishment of an open-source DRM standard for digital books, their lead acting counsel told the Huffington Post.

"We are seeking relief for independent brick-and-mortar bookstores so that they would be able to sell open-source and DRM-free books that could be used on the Kindle or other electronic e-readers," Alyson Decker of Blecher & Collins PC told the news site.

Amazon and several of its publishing partners did not immediately respond to PCMag requests for comment, while Random House declined to comment and a Simon & Schuster spokesperson offered the following:

"We believe the case is without merit or any basis in the law and intend to vigorously contest it. Furthermore, we believe the plaintiff retailers will be better served by working with us to grow their business rather than litigating."

The suit also references Apple's litigation issues with DRM locks it formerly placed on music sold through its iTunes store, implying that Apple's abandonment of DRM in 2009 should be seen as a precedent for how e-book sales and distribution should be handled.




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