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States modify payouts and credits in ebook pricing settlement

Many ebook buying consumers in 49 states will soon receive payments as a result of the states’ settlement with publishers HarperCollins, Hachette and Simon & Schuster. The states have provided a few more details about how those payments will work and have changed some things slightly.

In a document filed with the U.S. District Court for the Southern District of New York, the states’ attorneys lay out two modifications to their original settlement:

1. Payouts: The settlement had originally said that consumers who bought agency-priced ebooks between April 1, 2010 and May 21, 2012 would receive $1.32 per book for purchase of New York Times bestsellers, $0.36 per book for frontlist titles [in their first year of publication], and $0.25 for backlist [older] titles.” But retailers have said they “will be unable to provide the degree of precision needed to accurately separate and identify frontlist and backlist purchases,” so instead there will now be just two payout categories: $1.32 for New York Times bestsellers and $0.3o for all other titles.

2. Credits: The way that customers receive credits is also changing. The settlement had originally said that retailers like Amazon (s AMZN) and Barnes & Noble (s BKS)

would automatically deposit the calculated credit amount in eligible customers’ accounts and would send a notice to consumers telling them that the credit is available for use. As credits are used, the retailer would bill the settlement escrow account for reimbursement. At the end of one year, unused credits would expire.

Amazon will still use this system, and unused credits will expire after a year for Amaozn customers. But other retailers told the states “they would be unable to track the   amount of the specific settlement credit within a customer’s account if that customer has other sources of credit in the account, such as a refund for a returned book or a gift certificate.” The other retailers said they wouldn’t be able to terminate the credits after a year and wouldn’t know when they were used. “Retailers have also expressed concern that their particular method of crediting accounts might be viewed a gift card and could run afoul of certain state laws that require that gift cards have no expiration date.”

So now, Barnes & Noble, Apple (s AAPL) and Kobo will use a different credit system. (Google(s goog) and other ebook retailers are sending out paper checks.) Eligible customers will instead get an email about an account credit and will then have to activate that credit, either by clicking a “click to activate” button or by typing a code into their account. “The customers will have an entire year to activate their credits. However, once activated the credit will be available in the customer’s account for use at any time, and will not expire.”

Here’s the full filing, including a copy of the notice that will be sent to customers.

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<em>Photo courtesy of Shutterstock user <a href=”″>Mohd Hasmi Hamidi</a>.</em>

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