In a decision that was largely expected, Judge Denise Cote denied motions by Apple and five publishers seeking to dismiss the class action lawsuit brought against them for what the suit contends is fixing e-book prices when they moved to the agency pricing model.
The decision, announced Tuesday afternoon, was made in the consolidated class action lawsuit that was first filed last summer, well before the Department of Justice and numerous states filed their own lawsuits against the publishers and Apple in April. The ruling means the civil suit against Apple and Hachette, HarperCollins Simon & Schuster, Penguin and Macmillan can move forward even though the DoJ and states have reached settlement agreements with Hachette, HC and S&S. Judge Cote is overseeing the civil class action as well as the suits brought by the DoJ and states.
In her decision to let the civil suit move into the discovery phase, Judge Cote wrote that the suit “plausibly alleges that Apple and the Publisher Defendants took part in a conspiracy in restraint of trade, that an object of this conspiracy was to raise prices for eBooks, and that this restraint was unreasonable per se.”
Judge Cote backed arguments made by Hagens Berman, the lead law firm in the class action, that the move to the agency model met the different needs of Apple and the publishers in a rapidly changing marketplace where Amazon was driving down the price of e-books. “The switch to the agency model meant that the Publisher Defendants could control retail prices, whereas the MFN [most favored nation] clauses protected Apple and its 30 percent commission from price competition by other retailers,” Cote wrote.
Judge Cote called the agreement between the publishers an “horizontal” conspiracy, since “this agreement has nothing to do with enhancing efficiencies of distribution from the manufacturer's point of view. Rather, it has everything to do with coordinating a horizontal agreement among publishers to raise prices, and eliminating horizontal price competition among Apple’s Competitors at the retail level.”
The judge rejected all of Apple and the publishers agruments to dismiss, including Apple’s contention that it had little in common with the publishers. Judge Cote noted that the class action acknowledged that Apple (which allegedly joined the conspiracy to profitably enter the e-book without the need to compete with Amazon’s $9.99 e-book price) and publishers (who were allegedly motivated by their interest in protecting the market for higher-priced, higher-margined hardcover books) had different motives to reach a deal, but that the suit “plausibly alleges that these motives converged to cause the Publishing Defendants and Apple to join a single conspiracy to eliminate price competition at the retail level and raise the prices consumers would pay for eBooks.”
The next major conference pertaining to the class action, DoJ and state suits is set for June 22.
