Apple Agrees to Pay $450 Million to Resolve e-book Price Fixing Case

By Joe Rizzo July 18, 2014

Over two years ago, the U.S. accused Apple, along with five of the nation’s largest publishers of conspiring to raise e-book prices. In a civil antitrust lawsuit, the Justice Department alleged that CEOs of the publishing companies met regularly in private dining rooms of upscale Manhattan restaurants to discuss how to respond to steep discounting of their e-books by Inc.

According to the lawsuit, the executives also called and emailed each other to work out a solution to what one of them called "the wretched $9.99 price point." Supposedly, the five publishers and Apple hatched an arrangement that would raise the price of many best-selling e-books to $12.99 or $14.99. The government alleged the publishers then banded together to impose that model on Amazon.

To resolve this matter, Apple has agreed to pay $450 million. Of this amount, Reuters reports that $400 million would be returned to the consumers. However, the Apple settlement could still be altered by the 2nd U.S. circuit court of appeals in New York. The result could be the reversal of the original ruling. If this does happen, then Apple could either only have to pay $70 million, $50 of which would go to the customers, or the fine could be eliminated altogether.

In response, Apple has denied all allegations of price fixing with respect to e-books. In a statement, Apple spokeswoman, Kristin Huguet said "We did nothing wrong and we believe a fair assessment of the facts will show it. The iBooks store has been good for consumers and the publishing industry as a whole, from well-known authors to first-time novelists. As we wait for the court to hear our appeal, we have agreed to a settlement which is contingent on the outcome of the appeal. If we are vindicated by the appeals court, no settlement will be paid."

This settlement offer comes ahead of a damages trial scheduled for August, in which U.S. states and lawyers for a class of consumers were expected to seek up to $840 million. The deal follows earlier settlements with the five publishers, Penguin Group, Harper Collins, Simon & Schuster, Hachette and Macmillan, that settled for $166 million for e-book purchasers.

In a related statement, New York Attorney General, Eric T. Schneiderman said “This settlement proves that even the biggest, most powerful companies in the world must play by the same rules as everyone else. In a major victory, our settlement has the potential to result in Apple paying hundreds of millions of dollars to consumers to compensate them for paying unlawfully inflated e-book prices.”

According to lawyers for the plaintiffs, the $166 million settlement from the publishers combined with the $450 million from Apple, makes the recovery "among the exceedingly rare cases that provide consumers nationwide with double the amount of their estimated damages."

What is also interesting is that Apple’s settlement comes at the time of a well-documented disagreement between Hachette and Amazon. They have been attempting to hash out pricing for e-books in new contracts. Hachette is the first of the five major publishers to renegotiate e-book terms with Amazon. There have been a lot of arguments from both sides and as of now, an agreement has yet to be made between the two companies.

At this point, all of this is contingent upon what happens in the 2nd U.S. Circuit Court of Appeals in New York. If the original ruling is overturned, then Apple could get off scot-free and potentially not have to pay anything.

Edited by Maurice Nagle

TechZone360 Contributing Writer

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