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Defunct Indie eBook Retailer BooksOnBoard Files Antitrust Lawsuit Against Apple, 5 Publishers

BooksOnBoardbooksonboard may have abruptly gone out of business last April but that doesn’t mean it’s completely gone. Some remnant is still active, and last week it filed an antitrust lawsuit.

Abbey House Media, the Texas-based company that owned and ran BooksOnBoard, filed a lawsuit in Manhattan last Friday. The lawsuit alleges that Apple colluded with 5 publishers, HarperCollins, Hachette, Macmillan, Penguin, and Simon & Schuster, to raise the price of ebooks and artificially restrict competition via price controls.

They’re basically making the same argument as the one Diesel eBooks made when that ebookstore filed its suit a couple weeks ago. Both parties are pointing to the lawsuit which the Department of Justice filed against Apple and the publishers in April 2012. The 5 publishers settled before trial, but Apple lost in July 2013.

BooksOnBoard (and Diesel eBooks) are arguing that they are two of the parties harmed by conspiracy, with BooksOnBoard even going so far as to claim that Agency is what killed it. (Diesel eBooks isn’t quite dead yet, but it is shutting down 5 days from now.)

According to the complaint, BooksOnBoard says that before Agency took effect in April 2010, they were the largest independent ebook retailer in the United States, with revenue behind only Amazon and Barnes & Noble. (I think they are exaggerating for effect.)

This retailer launched in 2006, before the Kindle, and they built their customer base via aggressive pricing of their large ebook catalog. But all of that changed in 2010. "Once Apple and the publisher defendants entered into their price-fixing agreement, however, BooksOnBoard was no longer able to offer its favorable pricing," the lawsuit states. "After years of steady growth, in April 2010 — right after the imposition of agency — BooksOnBoard quickly went under for all intents and purposes."

While I do believe that they suffered under Agency, I also think that the claim that Agency killed BoB in April 2010 is rather hyperbolic. The retailer didn’t cease operations until April 2013, so their demise was not nearly as sudden as they would make it sound. Rather, the death of BooksOnBoard more closely resembles a case of slow strangulation rather than a sudden act of violence.

But how BooksOnBoard died isn’t really that important; what matters is that Agency made it much more difficult for this retailer to compete effectively. Rather than foster competition, as many in publishing industry have claimed, Agency pricing discouraged buyers from shopping around, thus making it harder for the smaller retailers to attract and keep customers.

And I’m sure it didn’t help the indies that shortly after Agency came to pass, ereader prices dropped through the floor. That encouraged readers to buy a device tied to one of the majors and then primarily shop with that major ebook retailer.

As ex-retailers, BooksOnBoard and Diesel eBooks have no further need of publishers as a source of content. This removes what little disincentive remained  to discourage the retailers from filing suit, which means that they can keep pursuing this lawsuit until they either lose or their lawyers quit.

I do not expect the publishers or Apple to settle this lawsuit, so this is probably going to drag out over several years. Barring some unexpected ruling, I would place the over-under at 3 years.

Thanks, Anne!

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fjtorres March 26, 2014 um 5:40 pm

I’m not sure they’re exagerating.
BoB was known for, ahem, not enforcing georestrictions too dilligently so they were quite popular with offshore buyers.

Also, BoB was unable to secure Agency contracts with the publishers for 6-9 months which left them with nothing but romance and Smashwords titles as draws. That is what kept them afloat but even after they regained access to the BPH bestsellers the lost customers never came back. If they can document foot-dragging on the publisher side they might have a case.

Mike Bentley March 27, 2014 um 12:42 pm

Agency pricing is where publishers set prices on the retail sites. That wasn’t the issue. The caveat with Apple was that Publishers by contract couldn’t discount titles on Amazon, say, without also matching the price on the Apple site.

fjtorres March 27, 2014 um 12:59 pm

The issue for BoB and Diesel was that the conspirators tore up all existing contracts and left them without books to sell, to grease Apple’s entry into the business. Whike they were stuck in negotiation limbo, Apple had access to the books they were denied. In effect, they took their sales and gave them to Apple. Even Amazon lost access to some publishers' books for a month or more.

Valentine March 31, 2014 um 1:16 pm

Ebooks, the Holy Grail for Amazon.
Just imagine, they sell their customers online storage, gigabytes for pennies. Then sell ebooks, a few megabytes at most for a book, that goes for 10-30 USD.

The profit margins must be sky high compared to everything else they sell, so, yes, most likely went all the way in gaining those publishers business.

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