Canada: Harlequin publishing joins the ranks of corporations under investigation following a US class action lawsuit

Harlequin’s reputation as a publisher and digital publishing pioneer may be tainted.

Recently the publisher became the target of a class action lawsuit alleging that it has been underpaying authors on digital royalties. The lawsuit alleges that Harlequin used a pair of Swiss-registered companies it controlled to pay authors only a fraction of the digital royalties they were owed.

According to the initial complaint, Harlequin authors are entitled to receive 50 per cent of net receipts for all digital sales. The problem is how “net receipts” is defined. The industry generally interprets the term as referring to the amount received by the publisher once the retailer has taken its cut (usually no more than 50 per cent).

The lawsuit alleges that Harlequin based its calculation on a much smaller sum, which the publisher was able to justify by interpreting “net receipts” as a licensing fee paid to its Swiss-based affiliate. The defendants argue that Harlequin’s Swiss arm (which was preceded by a Dutch company also registered in Switzerland for “tax purposes”) does not engage in any publishing activities and should not be used as the basis for calculating royalties.]

The initial complaint breaks it down into dollars and cents. For an $8 ebook, authors should expect a royalty of at least $2 (in other words, half of the $4 Harlequin would receive from the retailer). In reality, authors received between $0.24 to $0.32 for every digital sale, or just 6–8 per cent of true net receipts.

The lawsuit was filed in the Southern District of New York on behalf of three U.S.-based authors, Barbara Keiler (who writes under the pseudonym “Judith Arnold”), Mona Gay Thomas (“Gayle Wilson”), and Linda Barrett.

In a press release through Canada Newswire on July 19 Harlequin said  that they were made aware of a class action lawsuit brought against them by three former authors but that they wished to make it clear that this was the first time they had heard of these proceedings and that a complaint has not yet been served.

"Our authors have been recompensed fairly and properly for their work, and we will be defending ourselves vigorously," said Donna Hayes, Publisher and Chief Executive Officer of Harlequin.

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