At its conference on Friday, March 4, the Supreme Court declined to take up Apple’s appeal in its e-book price-fixing case, effectively ending one of the publishing industry's most closely-watched legal battles.
The Supreme Court's denial of certiorari means that Judge Denise Cote’s 2013 decision finding Apple liable is now considered final, triggering $400 million in refunds to e-book consumers under the terms of a 2014 settlement with 33 states and a consumer class. In addition, Apple will pay some $50 million in fees and attorney costs.
Apple attorneys had argued that Judge Cote erred in finding Apple liable for a “per se” case of price-fixing in 2013, claiming that Apple’s role as a vertical player required that it be judged under the more expansive rule of reason framework. The Supreme Court, however, rejected that argument without comment, leaving in place a 2-1 affirmation by the Second Circuit.
While there was no immediate timetable for when consumers might expect refunds, they should come fairly quickly. The Apple settlement is basically using the same apparatus that was used to distribute $166 million in settlement funds from publishers in 2014. In one crucial distinction from the publishers' settlements, however, refunds under Apple’s settlement can be spent on any product or service offered by the retailer; the publisher settlement funds could only be spent on books.
The Supreme Court’s denial ends one of the most contentious legal dramas in modern publishing history, dating back to the launch of the iPad in January, 2010. Concerned that Amazon’s $9.99 Kindle prices for newly released e-books was devaluing books in consumers’ minds (but individually ill-equipped to move Amazon off that price point) five major publishers simultaneously negotiated a hasty deal with Apple that would change the e-book business from wholesale to agency pricing.
The move enabled publishers to collectively retake a measure of control over consumer e-book prices—which they immediately raised. And for Apple, the deal meant that titles in their new iBooks store could not be undercut by Amazon.
But the deal drew scrutiny almost immediately, and investigations by individual states and eventually the U.S. Department of Justice followed. In August of 2011, a class action suit was filed by Seattle-based firm Hagens Berman. And in April, 2012, the DoJ sued Apple and the five agency publishers for antitrust violations.
Three of the publishers (Hachette, HarperCollins, and Simon & Schuster) settled charges immediately, while Macmillan and Penguin settled just before trial. In all, the publishers paid $166 million in refunds to consumers, and submitted to two years of sanctions, which mostly expired at the end of 2014.
Apple, however, proceeded to trial. In 2013, after a three-week bench trial, Judge Denise Cote quickly found Apple liable for “facilitating and encouraging the Publisher Defendants’ collective, illegal restraint of trade.” In October of 2015, the Second Circuit Court of Appeals, by a 2-1 margin, affirmed Cote's ruling.
Apple contends that its conduct was justified by Amazon’s monopolistic share of the e-book market, and that its entry was on balance pro-competitive. However, antitrust experts told PW from the beginning that Apple's appeal was a long shot.
Writing for the Second Circuit majority, Judge Debra Ann Livingston declared Cote’s 2013 ruling to be “amply supported and well reasoned.”
In a statement, Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division, pointed out that with the $166 million previously paid by the publishers, Apple’s payment will mean that $566 million will be repaid to e-book purchasers.
"Apple’s liability for knowingly conspiring with book publishers to raise the prices of e-books is settled once and for all," he added.
Reaction
In a statement, Attorney Steve W. Berman of Hagens Berman (which represents the consumer class) said they were "incredibly pleased" with the Supreme Court's denial, and said his firm will now work to bring the settlement funds to consumers "through a quick process." Berman said he hopes to have refunds to consumers by fall.
But that time frame, he added, is subject to one minor wrinkle: there is still a lone objector to the settlement. While that objection was rejected by Judge Cote, and the Second Circuit, the objector has the right to appeal to the Supreme Court. In its eight-page page ruling last month, the Second Circuit said the objector's challenge was “devoid of merit.” In court filings, the objector, John Bradley, was described as a “serial objector” with no real stake in the settlement.
Also in a statement, an Amazon spokesperson said they are "ready to distribute the court-mandated settlement funds to Kindle customers as soon as we’re instructed to move forward."
We will continue to update as reactions come in.