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Print 36 comment(s) - last by retrospooty.. on Jun 18 at 10:55 PM

Gadgetmaker faced up to $840M USD in damage claims after being found guilty of ebook price fixing

With a trial set for July over accusations that Apple, Inc. (AAPL) and its late CEO -- Steven P. Jobs -- brokered illegal collusive agreements with publishers to fix eBook (electronic book) prices at lower levels, Apple has backed off at the last minute, agreeing to a settlement with a coalition of state attorney generals and consumers.
 
I. New Settlement -- Contents Unknown
 
The most crucial detail -- what is in this settlement -- is missing, as Apple successfully negotiated a court order to seal the settlement.  Given that Apple faced up to $840M USD in potential damages claims (by prosecutors' estimations), the settlement is probably less than $100M USD.
 
Apple has a month to submit a filing asking for approval of its settlement offer.  That filing may provide some insight into exactly what it's willing to pay back to consumers in damages.

The popular gadget maker's legal woes stem from the 2010 release of the iPad.  To drive the device's sales Apple made a major foray into the eBook market, brokering key contracts with publishers.
 
The case was somewhat unusual because Apple at the time did not have a dominant position in the eBooks market.  However, a lengthy federal probe by the U.S. Department of Justice revealed a long paper trail of corporate communications, including emails from Steve Jobs and his executives.  These emails painted what seemed to be a clear picture that Apple colluded with the publishers to fix prices to try to break the power of Amazon.com, Inc. (AMZN).  Price fixing is illegal even for minority players in a given market, according to U.S. antitrust laws.
 
At the time, Amazon's prices for eBooks were around $9.99 USD -- a price that was often below cost.  After Apple's tactics, prices jumped to as high as $15 USD.
 
II. A Brief Recap and the Remaining Unknowns
 
The federal probe's implication that Apple and the publishers price-fixed was met with a federal lawsuit in April 2012.  The publishers who signed questionable contracts with Apple quickly settled, leaving Apple alone to fight the accusations.  The case went to trial and Apple struggled to defend itself during the June 2013 trial.  The trial was held in Manhattan, New York at the U.S. District Court for the Southern District of New York.
 
In July 2013, after reviewing both sides’ arguments and evidence, Judge Denise Cote ruled in the non-jury trial that Apple was guilty.  She proposed a set of solutions to correct the situation in Aug. 2013.
 
Apple quickly rejected that settlement offer, taking particular issue with the idea of an external monitor to watch its behavior for signs of wrongdoing.  It argued a monitor would be a competitive threat and it should be allowed to self-report on its progress in avoiding anticompetitive/collusive behavior.  Apple was granted a hearing before the 2nd U.S. Circuit Court of Appeals in New York to plead its case, but the Circuit Appeals court was unconvinced and order that the lower court's ruling stand.
 
The finding of guilt allowed state attorney generals and consumers to band together under a second suit in the class action lawsuit against Apple seeking monetary damages.  Judge Cote was scheduled to hear both sides and issue a ruling on whether Apple owed the states and consumers damages.
Apple e-book
The ebook ruling has helped to reinforce Amazon's dominant position in the market.

Apple was last heard vowing to file a formal appeal Judge Cote's original finding of guilt (a more aggressive move than its previous tactic of calling for a hearing to try to dismiss the external monitor).  It is probable that Apple may have agreed to forgo its appeal as part of the settlement.  It is unknown how the current settlement impacts Apple's ongoing legal complaints about the external monitor.
 
Ultimately the case appears to result in cheaper rates for consumers, but the dark side is that it has served to reinforce Amazon's dominant position in the market.  Amazon has recently begun to show signs of abusive behavior, delaying shipments of paper books and the release of highly anticipated new titles (both in digital and non-digital form), in an effort to squeeze a bigger cut of digital + non-digital book revenue from publishers.
 
Barnes & Noble, Inc. (BKS) one of Amazon's major rivals was unhappy that DOJ prosecutors had no issue with the market's most dominant player sell eBooks below cost.  It has argued that such a tactic should be illegal.

Source: Bloomberg



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RE: Typical American Govt "Justice"
By anactoraaron on 6/17/2014 3:46:16 PM , Rating: 2
Backroom deals and details hidden from the public has this administration written all over it.

quote:
the settlement is probably less than $100M USD.


I guess I'm not following this story enough to know where the other $900 million is being fined.


RE: Typical American Govt "Justice"
By Reclaimer77 on 6/17/14, Rating: 0
RE: Typical American Govt "Justice"
By tonyswash on 6/17/14, Rating: -1
RE: Typical American Govt "Justice"
By retrospooty on 6/17/2014 5:10:20 PM , Rating: 5
"Meanwhile the company actually using monopoly power to strong arm people in the publishing business is Amazon."

I really take issue with this statement Tony... You mean even through your "Apple is Rosey" colored glasses, you would say that the company that illegally conspired to artificially raise prices (and BTW was found guilty of that charge) is less the villain than the company that lowered prices for all customers?

Even for you that is a HUGE stretch of logic.


RE: Typical American Govt "Justice"
By Reclaimer77 on 6/17/14, Rating: 0
RE: Typical American Govt "Justice"
By tonyswash on 6/18/14, Rating: -1
RE: Typical American Govt "Justice"
By retrospooty on 6/18/2014 8:22:04 AM , Rating: 2
I re-post the same question... You mean even through your "Apple is Rosey" colored glasses, you would say that the company that illegally conspired to artificially raise prices (and BTW was found guilty of that charge) is less the villain than the company that lowered prices for all customers?


RE: Typical American Govt "Justice"
By Cheesew1z69 on 6/18/2014 8:32:54 AM , Rating: 2
Come on, you know the answer to that, of course he is going to defend Apple no matter what.


By retrospooty on 6/18/2014 8:50:59 AM , Rating: 2
Actually I think he would just avoid the question, but now that he has been called out for avoiding it he will try to post a somewhat watered down response. LOL. But lets see.

It's a valid question... Like reclaimer said above. "It's not the convicted murderer you need to be worried about, its' that guy who cut the warning tag off of his mattress" - It's all fine when its his own mattress, but sooner or later, they are gonna come for the tag on YOUR mattress!!! aaaaarrgh!


RE: Typical American Govt "Justice"
By Reclaimer77 on 6/18/14, Rating: -1
By retrospooty on 6/18/2014 10:55:55 PM , Rating: 1
holy crap reclaimer is on fire today


RE: Typical American Govt "Justice"
By nafhan on 6/17/2014 5:10:53 PM , Rating: 2
quote:
the company actually using monopoly power to strong arm people in the publishing business is Amazon
Strong arming the publishing business - I'm OK with. Their whole business is all about strong-arming each other, their writers, and the consumer.

Screwing over consumers (basically the anti-trust case Apple lost, as discussed in this article), I'm much less OK with.


RE: Typical American Govt "Justice"
By Cheesew1z69 on 6/17/2014 5:15:36 PM , Rating: 2
And yet, he still defends Apple as if they did no wrong. That's dedication. Or...just outright insanity.


By themaster08 on 6/18/2014 2:21:06 AM , Rating: 2
It's pure idiocy. The fact that he feels obliged to defend Apple after they were proven to be wrong in a court of law goes to show that.

He is unable to subject himself to any form of criticism towards Apple. Even when that criticism is evidenced and justified. That, I would say, is the sign of an idiot.


RE: Typical American Govt "Justice"
By hpglow on 6/17/2014 11:59:47 PM , Rating: 3
Give up guys. Just move into Reclaimer's mothers basement so you two can end your obvios sexual tension.


By Dorkyman on 6/18/2014 10:34:32 AM , Rating: 1
Good one. But it should be obvious you need a spellchecker.


RE: Typical American Govt "Justice"
By TheJian on 6/18/2014 6:28:31 AM , Rating: 1
Even the prosecutor only estimated 840mil, so when you settle it's FAR less.

They should have taken it all the way to the end and bled apple for as much as possible. At these rates they did the crime, but they didn't do the "time" so to speak. They will never stop attempting to screw people unless the punishment is in the BILLIONS. IE when Intel makes 60B in earnings over the years they screwed AMD, and then give up a paltry ~1B+ they laugh and go right back to breaking the law. Who wouldn't? If the fine had been $30Billion directly in a check to AMD, they'd think twice and so would EVERY other company with a CEO that had half a brain.

Punishments need to explode exponentially here in order to have ANY effect. Same story with MS, they earn $20B+ now, so a fine of even a few billion after YEARS of a court case is laughable to these people when they make $80B etc during the case. They'll continue to use anti-competitive practices until it doesn't make them money, meaning until you fine the holy living crap out of them (as in a FEW YEARS worth of their earnings). Can't blame them, it's good business and kills your enemies. Shareholders would then vote to fire them all and so would boards, for doing such COSTLY mistakes. Until then, get ready for more laws being broken ;)


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