Apple’s Collusion with Big Publishing to Raise E-book Prices: The Saga Continues

consumer case captionRemember when the U.S. Department of Justice sued Apple and five big publishers* for antitrust violations? The publishers all settled before trial. Then, after a trial last year, Judge Denise Cote of the U.S. District for the Southern District of New York found Apple liable for violating antitrust laws by conspiring with the publishers to raise prices on consumers.

Cote’s opinion meant that a related consumer class action case against Apple would go to a damages trial to see just how much Apple would have to pay to compensate readers. However, a week ago, Apple and the lawyers for the consumer class proposed a settlement, which now goes to Judge Cote for approval. (Individuals can settle their own lawsuits whenever they want, but class action settlements have to be approved by the Court to make sure that they’re fair to all the members of the class.)**

I’ve written before about Apple’s rather unrealistic view of their own products, and their proposed settlement reveals yet another example of Apple’s penchant for hyperbole. Just a few months after Apple attempted to remove Judge Cote  from the case because she had noted “consumers of e-books—including Apple’s own consumers—suffered hundreds of millions of dollars in harm,” Apple is now proposing a settlement that would pay up to $400 million to consumers (plus $50 million to the states and the attorneys).

But there’s a catch, and that’s what Judge Cote was concerned about in a conference call with the lawyers yesterday. The proposed settlement would not end the case, but would simply avoid the damages trial. Apple would continue with its appeal of Judge Cote’s findings last year: if Apple lost that appeal, Apple would pay $400 million towards a fund for consumers who bought e-books from any of the settling publishers between April 1, 2010 and May 21, 2012, plus $20 million to States that sued Apple, and $30 million to the lawyers for the class. Conversely, if Apple won the appeal, Apple would pay nothing.

This is the part Judge Cote was worried about: if Apple wins just a part of the appeal, even on a very technical issue that simply results in a new trial, then Apple only has to pay $50 million to the consumer fund, plus $10 million to the States and $10 million to the lawyers for the class. That is a significantly worse deal for consumers, and it could end up creating a situation where Apple has been found, conclusively, to be liable for antitrust action, and yet walks away paying only a fraction of the apparent damages.  $50 million for consumers is chump change for a company with $160 billion in cash on hand. It’s probably not enough to truly deter them from violating antitrust laws again as soon as they have the chance.

If we want to keep the e-book market lawful and competitive, companies like Apple need more than a slap on the wrist and a suggestion that they behave better next time. We’ll see whether Judge Cote approves the settlement proposal.

[Update August 2014: Despite the concerns Judge Cote raised during the conference call, she gave her preliminary approval for the Apple agreement]

*The list of publishers accused of collusion includes Hachette, HarperCollins, Penguin, Simon & Schuster, and Macmillan.

**Here’s Apple Proposed Settlement (a PDF).

17 thoughts on “Apple’s Collusion with Big Publishing to Raise E-book Prices: The Saga Continues

  1. Pingback: What the Heck is a “Revenant”? (A Tale of Past Revenge–And Present Greed) | The Misfortune Of Knowing

  2. Pingback: Is Amazon a “Monopoly” (Or Is The Publishing Industry Too Loose With Its Words)? | The Misfortune Of Knowing

  3. More books got in the hands of readers with keeping prices lower. I am a fan of Apple and am sorry for these lawsuits. I would read less e-books if prices are fixed to be more costly. But one thing that I don’t understand, was retailing prices not up to the retailer? Kinda the point of our consumer market. If set too high, supply and demand would surely find them out of business or modifying their prices. I guess I don’t know much of anything about these laws.

    1. Hi Donna! It’s hard to understand because Apple and the publishers were trying to go against/change market conditions by colluding with each other. I am no expert on what happened, but it’s really upsetting from a consumer standpoint. I would definitely buy fewer e-books if they were priced higher than they are right now, and I doubt I’d return to buying paperbacks or hardcovers (which are even more expensive, but could seem worth the higher price to some consumers in comparison to a computer file). I was once a fan of Apple, but that changed in 2011, when I learned more about Steve Jobs after he passed away.

  4. Speaking generally – and without taking sides in this case – it must be scary running any sort of business or profession in the States. Indemnity insurance premiums (premia?) must be huge with the magnitude of damages that tend to be awarded and this must drive up costs generally. Would you agree with this AMB?

    1. Hi Roy- Generally, businesses don’t insure antitrust violations (I doubt insurance companies offer such coverage), but most damages awards are just a drop in the bucket for companies like Apple. It’s part of the cost of doing business and that cost isn’t nearly as much as I think it should be.

  5. I wonder how much of this has been going on for a long time, but we are somehow now just becoming interested in the legality and politics of publishing. It’s interesting to me that readers are really following this Apple case and the Amazon/Hachette problems when they probably couldn’t have cared less a few years ago.

    1. I wonder how much readers (who aren’t also bloggers) are actually following the Hachette-Amazon dispute. I feel like it’s only the industry insiders who are up in arms about it. Before I started blogging, I didn’t know what Hachette was or that there was such a thing as traditional publishing versus anything else!

    1. Yes, it’s very ugly, and an interesting bit of context to the Hachette-Amazon dispute. People are using the term “monopoly” as a slur against Amazon without understanding that Hachette’s hands aren’t exactly clean.

  6. Reblogged this on DailyHistory.org and commented:
    We already had a few discussions about e-books this week at DailyHistory.org. I wanted to alert you to an article about Apple’s case where it colluded with publishers to raise prices. The Misfortune of Knowing as an excellent discussion on the proposed settlement of the Electronic Books Antitrust Litigation, i.e. Texas v. Penguin Group, Inc.

  7. Fisher

    With Hachette as one of the publishers on the list, this is an interesting backdrop to the ongoing Hachette argument with Amazon. From the outside, bookselling looks like a messy, messy world.

    1. Yes, it is. It amazes me that the people who are demanding DOJ investigation of Amazon seem to have such short memories, but it suits their agenda. Most of the people who are outraged by Amazon are connected to the publishers in some way.

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