July 16, 2014 10:01am PT by Eriq Gardner
Apple to Pay Up to $450 Million to Settle E-Books Pricing Lawsuit
On Wednesday, attorneys for 33 U.S. states detailed the terms of a settlement made with Apple Inc. to resolve claims that the computer giant worked with publishers to illegally raise the price of e-books.
The deal could be worth as much as $450 million if a federal appeals court affirms a district judge's ruling from last July that stated that Apple violated antitrust laws. If Apple has success on the appellate level, the settlement would shrink to $50 million, and possibly to nothing if Apple is eventually exonerated back in trial court.
The settlement still needs approval from a New York federal judge, so the plaintiffs have submitted a memorandum today in support. Read it in full here.
The dispute stems from Apple's launch of the iPad when it entered direct competition in the e-book market with Amazon.com and Barnes & Noble. Working with publishers including Simon & Schuster, HarperCollins, Penguin, Hachette and Macmillan, Apple used an agency pricing model whereby publishers set prices and Apple would take a 30 percent commission.
The efforts would lead to parallel litigation from the U.S. Justice Department, 33 states and private consumers. They charged Apple with acting as the "hub" in a hub-and-spoke conspiracy. The publishers would soon settle claims against them for $166 million.
Last July, U.S. district judge Denise Cote ruled that Apple had "seized the moment and brilliantly played its hand," adding in her written decision that the launch of Apple's e-book store had "provided the Publisher Defendants with the vision, the format, the timetable, and the coordination that they needed to raise e-book prices."
The judge imposed a monitor to look after Apple and set the date for a trial to determine damages. Apple has vigorously contested its liability in a pending appeal but has worked out a deal with attorney generals in the interim.
According to the parties' memorandum, which calls the settlement "pragmatic" and the "result of hard-fought litigation," if Apple isn't successful in its appeal, it would pay $400 million to consumers and $50 million more in attorneys' fees and payment to states.
The plaintiffs say had the case gone to trial, they were looking for a final damage award of about $500 million to $625 million, after a jury award had been trebled and offset by prior settlements. But they note that "litigation outcomes are uncertain and risks exist," including potential adverse rulings on class certification, exclusion of expert opinions and venue disputes.
The bulk of the settlement money would go to those who purchased e-books from April 1, 2010 through May 21, 2012 from the above-mentioned publishers.