$69 Million E-book Settlement Gets Preliminary Approval; Notice to Consumers Begins

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E-books, viewed on devices like Amazon’s Kindle, arrived with the tacit promise that a competitive market would significantly drive down E-book prices, consistent with basic microeconomic theory, in stark contrast to labor-intensive conventional books. Early on, that promise was fulfilled, with E-books typically costing less than $5. However, in suspicious unison, E-book sellers found higher price points, first $9.99, more recently $12.99, and in some instances entirely closing the gap between E-books and conventional books.

The U.S. Justice Department and two state attorneys general took notice, and their investigation led to the allegation that consumers had paid “tens of millions” of dollars more than market-competitive prices, owing to a pricing conspiracy among E-book publishers. Five publishers were named as defendants in litigation prosecuted by the DOJ and state AGs: Hachette, HarperCollins, Simon & Schuster, Penguin Group and MacMillan.

Three of the publishers have agreed to a settlement that was granted preliminary approval in September; Penguin and MacMillan have not yet settled. Now, as the parties await final court approval, consumers are beginning to receive tangible indications of how they will benefit from the settlement. While the settlement announcement indicated that the defendants would pay substantial amounts under the terms of the agreement (Hachette: $31,711,425; HarperCollins: $19,575,246, and Simon & Schuster: $17,752,480), there was a paucity of detail concerning the settlement’s ground-level mechanics, in particular the remedies available to consumers who bought E-books and are within the settlement class definition.

Now, clearer indications of those details have emerged, as E-book retailers such as Amazon.com have begun sending emails informing customers that they may be entitled to credits in connection with purchases made between April 2010 and May 2012. Although defendants in the suit were publishers, the settlement’s ground-level administration will predominantly take place through retailers, with which customers have a close and regular nexus (unlike the publishers). Consumer refunds will appear in their online accounts on iTunes, Amazon and Barnes & Noble, except for consumers who purchased their E-books through Google or Sony’s storefronts, who will receive checks.

Along with consumers, retailing giant Amazon.com was also alleged to be a victim of the price-fixing scheme. The suit contended that publishers colluded with Apple to increase the price of E-books, thereby confounding Amazon’s discount pricing and allowing the Apple iPad to compete with the generally lower prices for E-books readable on the Amazon Kindle. Apple is also a defendant in the action, and is not part of the settlement. Accordingly, the litigation continues against Apple and the two non-participating publishers, Penguin and MacMillan. A final approval hearing on the settlements will be held on February 8, 2013.