EBOOK NEWS: Apple Enters Hi-Lo Settlement of E-Book Price-Fixing Claim Contingent Upon Result of Appeal from DOJ Suit

Apple, Inc., has revealed details of its settlement with states and consumers alleging that Apple conspired to fix the prices of eBooks. The suit, filed in the U.S. District Court for the Southern District of New York (Manhattan), follows an earlier case by the Department of Justice in which U.S. District Judge Cote ruled that Apple orchestrated a price-fixing conspiracy among five publishing companies. That decision is being challenged on appeal, and the outcome of the agreement between Apple and plaintiffs in the present suit is contingent on the outcome of that appeal, with a range of exposure to Apple between $0 and $450 million.

In entering the settlement it appears that neither Apple nor the plaintiffs agree or concede that the other side is right. Rather, they agree to follow the fortunes of Apple’s challenge of the DOJ ruling. Specifically, there are at least three potential outcomes disclosed as follows:

  • Apple loses the appeal and the District Court’s ruling is affirmed
  • Apple obtains the right to go back to the District Court for trial.
  • Apple has the case thrown out.

According to the papers filed today, if the decision is affirmed, Apple will owe $400 million to consumers and $50 million to states and for attorney fees. If the case goes back to trial, Apple will pay $50 million to consumers and $20 million to states and for attorneys fees. If the decision is thrown out, Apple won’t have to pay a dime.

The agreement makes sense from both sides. Apple caps its maximum exposure to about half what is sought in the lawsuit, with a big advantage if Apple is confident of its position on appeal. The plaintiffs, if confident, secure a substantial recovery without the risk of trial, and in the case of an Apple win in the DOJ matter, it doesn’t seem the plaintiffs would have a case in any event. “This settlement –- contingent on the outcome of Apple’s appeal –- represents a fair and equitable effort by all parties to resolve this litigation,” Connecticut Attorney General George Jepsen said in a statement.’

This is only the big picture. The settlement requires judicial approval. There are a lot of details, and anyone interested should research the matter. It is reported that states and consumers have recovered $166 million from earlier settlements with other publishers in the case. The case is In Re Electronic Books Antitrust Litigation, 11-md-2293, U.S. District Court, Southern District of New York.

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