Wednesday, May 16, 2012

Kindle News: Federal judge refuses to toss out class action lawsuit on e-book pricing, citing damaging Apple statements. 56-page ruling download.

U.S. District Court Judge Denise Cote refuses to toss out a nationwide class action lawsuit against Big5 and Apple filed in August 2011.

Associated Press's Larry Neumesiter reports that, in her written ruling, District Court Judge Cote cited Steve Jobs's statements, one that was video'd in answer to Walt Mossberg of WSJ at the initial iPad launch event ("the prices will be the same"), and one that was made to biographer Walter Isaacson about what Steve Jobs had told the large publishers named in the lawsuit ("the customer pays a little more, but that's what you want anyway").

The argument for dismissing the class action lawsuit was that Apple and the publishers named were just improving the efficiencies of distribution, but the judge rejected that, saying,
  "It has everything to do with coordinating a horizontal agreement among publishers to raise prices, and eliminating horizontal price competition among Apple's competitors at the retail level."

  AP's Neumeister adds that Apple had said last year that the charge that it had conspired with the major book publishers to raise the prices of e-books was not true and that it had instead (as Neumeister's explains their position) 'fostered innovation and competition by introducing its iBookstore in 2010 and said customers had benefited from e-books that are more interactive and engaging.'

  Neumeister's AP report states that
  'The judge wrote that Apple had a "strong incentive" to encourage publishers to agree together on the rules for e-book sales so that its iBookstore did not face stiff competition' and that 'With the fortuitous entry of Apple into the market for e-books, and the decision by Apple to join the price-fixing conspiracy, that horizontal conspiracy became a potent weapon for engineering a fundamental shift in an entire industry," the judge said.'

The ruling means that the class action can proceed to trial.

The Department of Justice settlements
  As we saw earlier, the U.S. Department of Justice had reached a settlement with Hachette, HarperCollins and Simon & Schuster.  The AP report on the district court judge's ruling says that the federal government is proceeding with its 'lawsuit against Apple and Holtzbrinck Publishers, doing business as Macmillan, and The Penguin Publishing Co. Ltd., doing business as Penguin Group.'  The settlement reached with the other 3 publishers is expected to help them avoid the class action lawsuit.

WSJ article on Judge Cote's ruling
The Wall Street Journal's "Cheat Sheet" article by Saul Griffith today described the ruling as a "damning indictment of collusive practices between Apple and five major U.S. book publishers," and Griffith quotes the judge further:
"In short, Apple did not try to earn money off of eBooks by competing with other retailers in an open market; rather, Apple 'accomplished this goal by [helping] the suppliers to collude, rather than to compete independently.' "
WSJ's Griffith adds, in his article titled, "Outlook Turns Gloomy as Judge Slams Apple in E-Book Case" ['Gloomy' was changed from 'not good'] :
' The proceedings probably ignored Apple's more substantive (and hidden) agenda – to thwart the growing popularity of Amazon’s (NASDAQ:AMZN) Kindle tablet by depriving the company of the opportunity to sell low-priced e-book content through the legacy ‘wholesale’ book selling model it created and dominated, controlling over 90 percent of e-book sales before Apple jumped into the game. '

Apple Insider's Mikey Campbell quotes Steve Perman, lead counsel and managing partner of Hagens Berman, the law firm handling the class action suit:

  "We thought that Judge Cote’s ruling was spot on, especially when she noted that we’ve gone above and beyond in illustrating the legitimacy of our case ... We are eager to push forward with the case.”

The 56-page ruling in PDF format, available for download
Marketwatch points us to the 56-page ruling, available as part of a set of documents at

Simple Timeline of events upon which the lawsuits are based
TIMELINE: Ebook Pricing Wars - what DOJ would have seen - March 12, 2012 Below are ways to Share this post if you'd like others to see it.
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  1. I saw this in several places (including the wsj) today. It's a very strong statement by the judge -- it gives some hope that DOJ will prevail v Apple, Pearson, and MacMillan -- notwithatanding what a lot of print media columnists are saying (they have a vested interest in the DOJ not succeeding).

    As I've said before, technology has fundamentally changed the game, and traditional print publishers of all kinds are facing declining fortunes -- unless they change their ways. So far it seems that only News Corp has figured out how to live with these changes.

    1. Edward, I think one problem is they face declining fortunes EVEN if they change their ways, and that's the main problem -- that they're not looking at how to mazimize the possiblities once they ever recognize that evolving technology has changed things a great deal and that they have to rethink how they deal with it and adjust expenses to the new realities to keep as much profit as they can from new publications, for their authors and for assuring that the companies can continue to publish new works they can back.

  2. The Ebook could become a gateway to significantly more income for traditional publishers. It makes reading easier for a great many people. One wild card: piracy.

    1. Gordon, I agree. As for piracy, it happens immediately now, on the higher price books. Stats show people are purchasing lower-cost ebooks and are happy to do that (which means Big5 type publishers are making less volume sales than they would), and once e-books get back to more affordable pricing, equal, say, to a paperback book, there'll be less incentive to look for pirated books.

      Can't stop the pirates easily, though I'd love to see tougher penalties for that, but it's possible to lower incentives for customers to look for them. In forums worldwide, people make it clear they want to be able to purchase the books they want but they don't want to feel 'taken' with artificially inflated prices.

    2. Understandable, since Ebook costs are lower. But both authors and publishers don't want to get "taken" by greedy hardware mfrs who might end up giving away Ebooks in order to sell computers and Ebook readers. This was the fate of encyclopedias back in the 90s.

      An author who spends a year writing a book does need to be compensated by his or her reader.

    3. Gordon, can't imagine that would be legal at all for contemporary or non-public-domain ones. I know that some hardware makers have included public domain books though.

  3. Unfortunately, many publishers and mor than a few authors would sign up for royalty free promotions to get exposure for a new book.

    1. I've wondered about so many books being free at any one time and how that will affect sales, but then Amazon would worry about that even more than I would :-) I think.

      And then there's this: one author who was making $100 in January and February saw quite a benefit for himself after participating in the Kindle Lending Library program -- he made $45,000 in March and attributes it to that program (which allows authors to promo their ebooks as free ones for 5 days of 90 or something).

      Now, he'd not be typical, but that would indicate other authors are doing somewhat better too, while we know some authors won't see any changes except that they can't sell elsewhere for a time period. 30-45-90 days? I can't remember.


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