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Apple's US$450 Million E-book Settlement Deal Approved by Courts

posted on 2014-08-04 23:48 EDT

Apple's settlement with consumers for US$450 million was approved by U.S. District Judge Denise Cote in New York on Friday. The amount will be distributed between lawyers and a class of consumers in 33 states and territories. Consumers will receive US$400 million and lawyers will receive US$50 million if Apple loses its appeal at the 2nd U.S. Circuit Court of Appeals in New York.

If the court finds in favor of Apple, they will be liable for no monetary pay outs. If the court overturns Judge Cote's decision in favor of a new trial, the company is liable for US$70 million, with US$50 million going to consumers.

Judge Cote stated that she believes it is unlikely the courts will overturn the case, and the US$450 million settlement includes provisions to make the scenario less likely.

Judge Cote set a last fairness hearing for November 21.

History

Federal Judge Denise Cote ruled that Apple was guilty of colluding with publishers Macmillan, Penguin (now Penguin Random House), Hachette Book Group, Simon & Schuster, and HarperCollins to fix e-book prices and effectively drive up consumer cost in an attempt to undermine Amazon's lower price offerings. Judge Cote concluded in a 159-page decision that evidence showed Apple had conspired to restrain trade in violation of Section 1 of the Sherman Act.

Apple argued that the deal to raise e-book prices caused no harm to the market and raised competition against Amazon.

The U.S. Department of Justice filed a civil antitrust lawsuit last year against Apple and the publishers. The suit charged the companies with colluding to raise e-book prices through the use of the "agency model," where publishers, not booksellers, set book prices.

The contracts forced retailers like Amazon to market their e-books at a US$12.99-14.99 price point. Publishers Penguin and Macmillan's opposition cited that Amazon.com, a competitor to Apple in the digital publishing front, was a "monopoly" before Apple introduced its iBookstore platform. Authors Guild president Scott Turow added that Amazon is lowering its prices "only as long as it takes Amazon to re-establish its monopoly." Amazon held 90% of the e-book market prior to the publisher's contract negotiations.

Simon & Schuster, Hachette Book Group, HarperCollins, and later Macmillan and Penguin agreed to settle with the Department of Justice and consumers for US$166 million.. The settlement required the publishers to end their contractual relationship with Apple, as well as any other contracts with e-book retailers that do not allow retailers to set their own e-book prices or contain a “most-favored nation” clause, which says that no other retailer is allowed to sell e-books for a lower price. The publishers may not enter into any new contracts that limit a retailer's ability to set prices for the next two years or enter into any new contracts with a "most-favored nation" clause for the next five years.

Source: Financial Review via Slashdot


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