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Apple to Pay $450 Million to Settle E-Book Price Fixing Case

Wednesday July 16, 2014 10:55 am PDT by Juli Clover

According to court records filed on Wednesday, July 16, Apple will pay $450 million as part of an out-of-court settlement with class action lawyers and state district attorneys over e-book price fixing, reports Reuters.

Apple first reached a settlement agreement with the 33 U.S. states and territories involved in the lawsuit in June, successfully avoiding a lengthy and expensive damages trial. Settlement details were sealed at that time, however, pending court approval. $400 million of the $450 million is earmarked for consumers.

The settlement is contingent on a pending appeals case Apple filed in February with the U.S. Circuit Court of Appeals in New York. In the filing, Apple asked the court to overturn the original ruling that found the company guilty of conspiring to fix e-book prices.

"We have obviously studied Judge Cote's July 2013 ruling in detail, and believe that the 2nd Circuit will agree with her conclusion that Apple did violate federal antitrust laws," said Steve W. Berman, managing partner of Hagens Berman and lead attorney representing the consumer class. "In any case of this magnitude, there are high degrees of uncertainty, and Apple's appeal of Judge Cote's well-reasoned ruling is an example of that uncertainty."

Though found guilty, Apple has maintained its innocence throughout the dispute, claiming that it "kick-started competition in a highly concentrated market, delivering higher output, lower price levels, and accelerated innovation." Should Apple's appeal be successful, sending the claim back to District Court, the company will pay out $50 million to settle consumer damages claims. If the appeals court reverses the initial decision entirely, Apple will pay no damages.

Along with $450 million in damages, Apple has also been subjected to several penalties levied by the U.S. Department of Justice, including an order to hire an external antitrust monitor. Publishers involved in the case, including Hachette, HarperCollins, Simon & Schuster, Macmillan, and Penguin also settled for a total of $166 million, which has already been making its way to customers in the form of refunds.

Top Rated Comments

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heyyoudvd

71 months ago

What a joke.

Apple tries to save the e-book industry from an abusive monopolist (Amazon) and instead of being thanked for improving the state of competition, the government slaps it down to protect the monopolist.

Rating: 29 Votes

Roger Wade

71 months ago

What a shame ...

Yes, I agree with you 100%.

it's too bad that Apple has to resort to these measures when they've got billions in the bank.

Rating: 21 Votes

ouimetnick

71 months ago

Hi Tim! :cool: didn't know you have a MacRumors account.

Rating: 14 Votes

johnnnw

71 months ago

Hahahahahahahahaha you are so brainwashed it's unbelievable

Hope you don't get an email signed "Tim Cook" telling you to jump off a bridge or something, you'd believe it was him.

Tip: it's fake

Apple can do no wrong in your eyes

Rating: 12 Votes

WBRacing

71 months ago

Though found guilty, Apple has maintained its innocence throughout the dispute

Yes, paying $450m as an out of court settlement screams "we are innocent" to me.

Rating: 12 Votes

jclo

71 months ago

I never understood that judgement. What exactly was the damage?

Legit question here, what is the difference between what Apple did and what Amazon does? Because I hear people say that Amazon gets away with worse than what Apple did.

is this the things about Apple and Publishers making prices "set" for ebooks?

This is an odd thing. it sounds like stopping the "price fix" means a company can sell books for a really low price (even at a loss) which is GOOD for the consumer.
BUT, that means smaller companies that cannot afford to sell that low or at a loss will LOOSE OUT. Which means less competition overall which isn't good for the consumer.

Like a double-edged (or triple-edged) sword.

Under the original wholesale model, companies like Amazon would pay a set amount for books from publishers and were then free to price ebooks however they wanted. Amazon often sold books at a loss or at very small profit margins to edge other sellers out of the market (and to encourage customer loyalty), which in turn forced publishers to continually cut the price on books. Publishers dislike the wholesale model because it encourages consumers to expect lower priced books, a burden that ultimately falls on them.

Under the agency model, set up by Apple, publishers set the price for books and retailers like Amazon were paid a set amount for every book sold (a 30/70 split, more or less). Because Amazon wasn't buying outright and setting its own prices, this ultimately led to higher e-book prices and more profit for publishers. Apple and six major publishers forced Amazon into an agency model over a wholesale model.

Another issue surrounding Apple's agreement with the major publishers included a "most favored nation" clause that prevented publishers from selling books at other retailers at a price lower than what was available in the iBookstore. Basically, publishers set book prices higher and no one could sell them lower than what was available in the iBookstore, and according to the DOJ, this resulted in artificially higher prices across the board for consumers. Definitely somewhat of a lose/lose situation -- either customers get higher prices or Amazon kills competition by taking a loss.

Rating: 10 Votes

SPUY767

71 months ago

Meanwhile Amazon is actively punishing publishers and emerges unscathed.

Rating: 10 Votes

D.T.

71 months ago

Tim should pay it in cash. With ones.

“Four hundred forty nine million, nine hundred, ninety nine thousand, and one ..."
"Four hundred forty nine million, nine hundred, ninety nine thousand, and two ..."

Rating: 10 Votes

dbrinn

71 months ago

The DOJ really made a bad call on this one. Their understanding of economics and free enterprise is mediated by their belief that lower prices are always better for the public. Short sighted-ness is the hallmark of our time, and the DOJ is no exception here.

Rating: 9 Votes

mw360

71 months ago

You clearly don't know what the case is about, the forced ALL the stores (Google, B&N, Amazon, Sony) the agency model, this is the price fixing thing.

Why don't you read what the case is about before writing such wrong thing and accusing others of not understanding when the one not understanding is you

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Loss leader is not illegal

I give up, when someone don't want to inform and prefer to live in ignorance and is repeating the same wrong things it is better to stop.

Actually it looks like you do have it wrong. Agency Model isn't illegal, MFN isn't illegal. Both together isn't illegal. Onerous terms on retailers aren't illegal, nor are sky high prices, nor is imposing a mimumum price on retailers, nor is running an entire industry on those models. What's illegal is when multiple supposedly competing suppliers agree with each other to each raise their prices. That is what has been judged to have happened when Apple and the publishers, switched to a different, perfectly legal, business model, ALL AT THE SAME TIME. It's a very murky verdict IMO (IANAL), relying on a lot of interpretation of motives, complex law, and a very slender array of solid facts. Apple's position, is that no collusion was necessary, given the attractiveness of the proposition, and the market conditions at the time. Many people agree with them, that is why Apple are investing in an appeal.

Rating: 8 Votes

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