Apple Agrees to Conditional US$450 Million Anti-Trust Settlement
posted on by Lynzee Loveridge
Apple agreed to a conditional settlement of US$450 million depending on the outcome of its latest appeal in the e-book price fixing case, according to court records filed Wednesday. The settlement will provide US$400 million to consumers if Apple loses its appeal to the 2nd U.S. Circuit Court of Appeals in New York. If the court finds in favor of Apple, the company is liable for either US$70 million (with US$50 million going to consumers) or nothing at all.
Apple has estimated earnings of US$37.04 billion in its last fiscal year, ending in September 2013. The projected payout of US$450 million would account for only one percent of Apple's earnings. The settlement was announced in June although its terms were not disclosed at the time.
A damages trial was planned for August 25. Attorneys generals in 33 states and territories and lawyers for a class of consumers planned to ask for US$840 million. Macmillan, Penguin, Hachette Book Group, Simon & Schuster, and HarperCollins already settled with consumers for US$166 million.
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. The settlement requires the publishers to end their contractual relationship with Apple in a week, 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.