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The high-fives must have been flying at Amazon(s amzn) this morning: millions of the company’s customers got notices to spend credits at its Kindle store, and Amazon didn’t have to pay a cent. Meanwhile, rival Apple(s aapl) will likely underwrite an even bigger shopping spree for Amazon customers sometime yet year.
Welcome to the ironic denouement of l’affaire ebooks, which reached a climax in 2013 when a federal judge found that Apple had brokered a conspiracy with book publishers to fix prices. The legal tussle resulted in the publishers settling their cases — which is what paid for the customer credits that went out today — while Apple fought on alone.
For now, the biggest winner is Amazon, which already dominated the ebook market at the time of the price-fixing scheme in 2010. Today, as a result of lawsuits brought by the Justice Department and state governments, Amazon is in an even stronger position with the publishers; it will also get a healthy cut of the $160 million or so that the publishers agreed to pay under a settlement.
As part of the settlement, ebook customers received credits to their Amazon Kindle, Barnes & Noble or Google Play accounts. While all this cost the publishers a pretty penny, they didn’t make out so badly since much of the money they paid out will come right back to them as customers use their credits to buy new ebooks. Meanwhile, the retailers — most of all Amazon — will collect their usual commission.
For Apple, which chose to fight rather than settle, it’s a whole different story. Right now, the company is in the midst of high legal torture at the hands of a hostile judge, class action lawyers, state attorneys general and the Justice Department.
Recent court records show that the class action lawyers and the states want Apple to pay damages of $280,254,374; they will then seek to triple that amount under special penalty provisions — which would result in a final bill close to $1 billion. The damages trial is set to start in May and, if Apple loses, consumers (and indirectly Amazon) can expect to receive another bushel of ebook credits next year.
Meanwhile, Apple is waging an uphill fight against the Justice Department to overturn last year’s anti-trust verdict. Currently, the company is waiting for its appeals court trial to begin, and is also asking for a change of venue in related proceedings to get away from the clutches of Judge Denise Cote, who has been openly hostile to Apple — even requiring the company to pay for a monitor, who is reputedly Cote’s friend and colleague, to investigate itself.
The whole business is starting to look absurd, especially as Apple remains a marginal player at best in a world where Amazon is still dominant. While Apple deserves some of the blame, not least for its ongoing intransigence, it’s also about time for the states and the Justice Department to find another target.