After four years of litigation, Apple has run out of appeals in its e-book price-fixing case. At its March 4 conference, the Supreme Court declined to take up Apple’s appeal, letting stand a 2013 finding by U.S. District Judge Denise Cote that Apple had conspired with five publishers to fix e-book prices, ending one of the publishing industry’s most closely watched cases. What happens now? Below are four issue to watch.
Under the terms of a 2014 settlement, involving 33 states attorneys and a consumer class, Apple will now pay $400 million in refunds to consumers (plus another $50 million in attorney costs and fees). Steve Berman, lead counsel for the consumer class, said that he hoped to have those refunds distributed by fall of this year.
In fact, the refunds could be distributed fairly quickly. Apple is using the same apparatus previously used by the publishers to distribute their $166 million in refunds in 2014. Consumers don’t have to do anything—if you received a refund the last time around, you’ll receive your Apple refund automatically. In a statement last week, Amazon officials said they are ready to release the refunds as soon as they are instructed to do so.
But there remains one hitch: the settlement has a lone objector, class member John Bradley. Though Bradley’s legal challenge to the fairness of the settlement was rejected by a court of appeals on February 17, he can still petition the Supreme Court to hear his objection. If he does, refunds will be delayed until his appeal is resolved.
After all is said and done, Apple and the five publishers will have refunded some $566 million to e-book consumers. And Apple’s $450 million settlement proved to be a bargain—without the settlement, the company could have been on the hook for as much as $840 million in damages, after trebling. And that does not include additional fines, costs, and fees.
Though publishers may have been hoping for the Supreme Court to somehow vindicate their actions with Apple, in practice they are better off with Apple having lost its appeal—after all, a good chunk of that $400 million in Apple refunds will very likely find its way to them. The question is, how much? Unlike the previous $166 million in publisher settlements, which had to be spent on books (print and digital), Apple’s refunds can be spent on “any product or service” offered by a retailer.
Despite the legal trouble, it’s worth noting that the publishers and Apple ultimately got what they wanted—the agency model for e-books is in place. Publishers now have a measure of control over the consumer price of e-books. But the next few years will be worth watching. With the DOJ sanctions expired and no game-changing device like the iPad on the horizon, a truer sense of the digital reading market could emerge on several fronts: what price points work best for e-books? How will sales of print and digital balance out? Can alternative models such as subscription services work? And perhaps most importantly, will e-book terms of sale change further, and to whose benefit?
Apple’s case may be over, but could antitrust regulators soon turn their attention back to the e-book market? Organizations such as the Authors Guild, the American Booksellers Association, and Authors United (the coalition of writers organized by author Douglas Preston) certainly think so. They have launched a letter-writing campaign urging the Department of Justice to investigate Amazon for abusing its market position.
At last week’s Digital Book World conference, antitrust attorney Jonathan Kanter suggested such a campaign would likely be an uphill battle. “I don’t want to discourage that—in fact I want to encourage it,” Kanter said of the letter-writing campaign. “The more voices that come forward, the better.” But general complaints about Amazon’s size and the way it squeezes publishers, he said, is not enough. “From [the DOJ’s] perspective, they can’t act on that.”
