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All 50 states may join e-book refund settlement

The lawsuits over price-fixing in the e-book market took a new twist today after a HarperCollins lawyer predicted that three publishers could reach a settlement with all 50 state governments in the next two months.

Such a deal would not only expand an existing proposed settlement that would refund money to e-book buyers, but would also short-circuit part of a large class action case now underway against publishers and Apple.

The developments came at a status hearing in Manhattan attended by Apple, the five “big six” publishers who are under investigation, the Department of Justice and  three state governments.

The parties had asked US District Judge Denise Cote to convene the hearing in order to help coordinate what is now a three-headed legal proceeding over alleged e-book price fixing. There are three cases because the federal government and the states filed separate suits in addition to a private class action that began last year.

The most significan part of today’s hearing came when counsel for HarperCollins, Shepard Goldfein, announced that three publishers — Harper Collins, Hachette and Simon & Schuster — were in “settling mode” and that he expected an agreement to be reached with all 50 states before long.

Under such a settlement, the states would collect “consumer restitution” to pay out on behalf of consumers who overpaid for e-books. In an announcement last week, Connecticut’s Attorney General George Jepsen said that two of the publishers were expected to pay $52 million as part of a deal with 15 states and Puerto Rico.

Goldfein did not comment on whether this amount would increase if all 50 states sign on to the settlement. Lawyers today also indicated that Simon & Schuster was poised to be part of the settlement.

Today’s news is a blow to Hagen Bermans, the Seattle law firm that beat off other class action firms for the right to play lead violin in the nationwide class action case. At today’s hearing, Goldfein explained that the settlement with the states’ effectively trumped the private class action — meaning e-book consumers will collect from the states and not via the private class action.

Steve Berman, who is heading the class action, responded at the hearing that the state settlement only applies to natural persons, not to businesses or libraries. HarperCollins’ Goldfein said after the hearing that there are few businesses and libraries who bought e-books.

Berman’s firm still has a chance to collect off the two publishers who refused to settle if he can persuade a jury they indeed fixed prices.

The two publishers — Macmillan and Penguin– and Apple (S AAPL) have denied wrongdoing and are fighting the lawsuits.

The conspiracy supposedly involves a plot by five publishers and Apple to wrest pricing power from Amazon by switching to so-called “agency pricing” in 2010.

Photo courtesy of Flickr user [dslrninja]

5 Responses to “All 50 states may join e-book refund settlement”

  1. That just means more lawyers and politicians will get more and the people who actually spent money to buy the books will get less – if anything at all trickles down that far

  2. David Thomas

    What is absurd about this: the states would realize a higher return for their efforts if they jointly charged sales tax on internet purchases then they will ever get out of the publishing industry. The entire publishing industry — not just the commercial popular reading segment — is tiny fraction of the size of cigarette companies. Also, there are fuzzy figures about the “consumer” loss being tossed around — the highest is $200 million for this year, which makes no sense considering Amazon was the only entity subsidizing the price at 9.99, and they control 60% of the market. In addition, the vast majority of e-books they sell are well under $5, many for free. If their real target is the Apple cash war chest, why not go after them directly? In this case, the state attorney generals are politicians in ambulance chaser clothing.

    • Richard Hartzell

      makes no sense considering Amazon was the only entity subsidizing the price at 9.99, and they control 60% of the market.

      No, the defendants in this suit are publishers with enough clout to switch to the agency model for their books — which makes the vendor merely a sales agent (like the guy who runs a newstand and sells you the newspaper) who isn’t free to set his own price, just collect 30% of the publisher-set price. The agency model was in effect for all of 2011 and much of 2010, so the Amazon-subsidized $9.99 price you’re referring to doesn’t apply to any of these sales. Under the agency model Amazon has been contractually prohibited from subsidizing the price of an ebook … which is the whole point of this legal brouhaha.

      • David Thomas

        Yes, exactly, so what monetary claim is being made? How have the consumers lost anything? What is the yardstick? It appears that they want to use 9.99 as the natural price of an e-book and claim the difference for consumers.