Class action trial over e-book pricing at least one year away


New court filings related to an alleged conspiracy between Apple (s aapl) and publishers over e-book prices show the matter may not be resolved until 2014 or later. The filings reflect the sprawling dimensions of the litigation and also underscore how the legal system moves at a much slower pace than the fast-evolving e-book market.

Lawyers for Apple, publishers, the U.S. Department of Justice and state governments on Friday filed a new schedule and status report about how they intend to undertake the case. The case itself turns on whether Apple and five publishers broke antitrust laws when they introduced a commission-style pricing system for e-books in a bid to halt Amazon’s (s amzn) growing dominance in the market.

The schedule confirms that a trial pitting the Justice Department against Apple and two of the publishers is set for June 3, 2013, and reveals that final preliminary filings in the related state government and class action cases are due in October of 2013. In reality, this means any class action trial would not take place until 2014. This second part of the proceedings is important because it determines how much money Apple and the two publishers will have to pay if they are found to have conspired to overcharge readers for e-books. The Justice Department segment of the case, set for next June, could result in new pricing rules but not payouts to consumers.

The new filings also set out a complex agreement as to how the parties will coordinate the expensive process of gathering evidence and deposing witnesses. Under the agreement, the Justice Department and state governments will share transcripts and other findings related to their investigations with the class action lawyers who are seeking millions on behalf of consumers.

The process has become especially complicated because three of the publishers have already reached a settlement with state governments, led by Texas and Connecticut, worth tens of millions of dollars that effectively cuts out the class action lawyers. The settlement, however, does not yet include every state and nor does it cover Apple or the other two publishers, Penguin and Macmillan. The holdout defendants, if found liable, could end up paying tens of millions more into the consumer settlement pool.

The holdouts, however, insist that they did nothing wrong and say that the Justice Department and their other accusers went after the wrong target. Apple and the publishers have said it is Amazon and its dominant control of the e-book market that should be the real subject of antitrust scrutiny.

The documents filed on Friday also state that the parties will begin talks with a mediator this fall to consider a settlement. For now, though, this appears to be a legal formality rather than a sign that the trial will be called off.

As the legal proceedings drone forward, the market for e-books continues to evolve rapidly. A growing number of reading platforms are entering the market — from the Galaxy tablet to new versions of the iPad, Nook and Kindle Fire — and the rest of the world is expected to join North Americans in embracing e-books (see my colleague Laura Owen’s recent report here).

E-book Litigation Schedule Copy
(Image by  Kristo-Gothard Hunor via Shutterstock)


Michael W. Perry

If you want to understand why this is happening, ask yourself who benefits. The ebook market desperately needs a common ebook standard and a coherent distribution system to replace the current higgly piggly mess. These lawsuits create FUD–fear, uncertainty and doubt. Authors, publishers, ebook distributors, and online retailers are afraid to work together, however transparently and legally, until this dispute is settled. As the biggest player in the industry, only Amazon benefits from the resulting chaos and the de facto standard that creates for their proprietary format and Kindle devices.

That’s why I have nothing but contempt for the clueless (or worse) DOJ lawyers who blundered into this dispute. Put them in a time machine back to the late nineteenth century, and they’d be suing several chains of gas stations (book publishers) and an auto maker (i.e. Apple) rather than going after the real ‘malefactor of great wealth,’ which was John Rockefeller’s Standard Oil.

Even at the height of its power, I doubt Standard Oil controlled anything like the almost 90% ebook market share that Amazon had when Apple and these publishers were engaged in their alleged conspiracy. And at that time Apple had a 0% share of the ebook market. How can anyone with a zero slice of the market engage in price fixing? Think about that for a minute.

Like I said, these DOJ lawyers are either stupid or something worse. Worse being that they’re on the take, Chicago-machine style. Both Obama and DOJ Secretary Eric Holder hail from Chicago, where political corruption is the norm.

Comments are closed.