Another Bite of the Apple: Tech Giant Settles with U.S. States, Consumers

Apple has come to terms with 33 U.S. states and the class of individual consumers who sued the corporation as a result of its e-book pricing agreements with five major publishers. In that class action lawsuit, which was set to go to trial on July 14, the states and consumers were seeking up to $840 million in damages from Apple. The precise terms of the settlement—which is awaiting final court approval—have not been made public.

This settlement stems from the April 2012 U.S. Department of Justice lawsuit accusing Apple and five publishers (Hachette, HarperCollins, Penguin, Macmillan and Simon & Schuster) of working behind the scenes to fix e-book prices by adopting the “agency” pricing model. Agency pricing would have allowed publishers to set the price of e-books, sidestepping the pricing traps set by Amazon, whose dominance in the digital and online book markets haunted every corner of that case. We’ve long maintained that the DOJ’s focus on Apple and the publishers ignored, and even sanctioned, Amazon’s anti-competitive conduct.

While Apple decided to take its fight to court, the publishers settled. We opposed this settlement, arguing that it would allow Amazon to resume its predatory pricing tactics and discourage competition in the e-book marketplace.

After the publishers’ settlement was approved, in July 2013 Judge Denise Cote ruled against Apple, saying the tech company coordinated a scheme with the publishers in order to challenge Amazon’s e-book pricing strategy. Apple is appealing that decision, and this week’s settlement is contingent on the result of the appeal.

The introduction of the agency pricing model slashed Amazon’s share of the U.S. e-book market from 90% to 60%, allowing Amazon’s competitors a chance to gain some much-needed traction in the market. Now Apple is taking the fall. Indeed, something about Amazon’s recent behavior suggests that the DOJ’s decision to go after Apple has emboldened Amazon to continue its browbeating of publishers.

Comments: 1
  • Jean Peregrine

    It’s important to bear in mind that this agreement is contingent upon the outcome of Apple’s appeal, still ongoing. If Apple wins on appeal, this flies out the window.

    Also, it may be important to remember that antitrust law has been literally inverted over the past few decades with respect to the question of monopolies. This process began under the Reagan administration, and has been continued. At this point a monopoly or near-monopoly may use its market dominance to drive smaller competitors out of business, and then raise prices, which is indeed an inversion of the actual statutes.

    It may be helpful if public perception and public pressure with respect to the application of the existing body of antitrust law were brought to bear to shift interpretation back to (irony of ironies) the original intent of the antitrust laws. Europe still applies rational concern for monopolistic abuse of market power – the US revels in such abuse.