Judge comes down hard on motion to dismiss class-action lawsuit against Apple and publishers over ebook pricing
A federal judge late yesterday allowed a lawsuit against Apple and five major publishers filed by a Seattle law firm that has offices in the same building as Amazon.com to proceed. While the decision was — as a Publishers Weekly report notes — “largely expected,” what was not expected was the blistering language of U.S. District Court Judge Denise Cote ruling against Apple, Penguin, Simon & Schuster, Macmillan, HarperCollins and Hachette.
As Larry Neumeister reports in an Associated Press wire story, Judge Cote “cited the confident voice of the late Apple founder Steve Jobs on Tuesday as she refused to toss out lawsuits alleging the company and various publishers conspired to drive up the price of electronic books. Cotes said “Jobs had made statements that agreements between the publishers and Apple Inc., based in Cupertino, Calif., would cause consumers to ‘pay a little more’ and that prices would ‘be the same’ at Apple and Amazon.com.”
Well, it was actually more damning than that. As Neumeister continues,
The judge rejected the argument that Apple and the publishers were merely improving the efficiencies of distribution, 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.”
The judge noted that Jobs told the publishers that “the customer pays a little more, but that’s what you want anyway.”
… 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.
“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.
As Julie Bosman summarizes it in a story for the New York Times, Judge Cote said the lawsuit “plausibly alleges that these motives converged to cause the publishing defendants and Apple to join a single conspiracy to eliminate price competition at the retail level and raise the prices consumers would pay for e-books.”
As Bosman also noted, the attorney who filed the lawsuit, Steve Berman of Hagens Berman— whose offices, an earlier Times story noted, are “in a Seattle office building that also houses Amazon offices” — was delirious. “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,” he tells Bosman. “We are eager to push forward with the case.”
It may not be quite so easy as he thinks, at least not in the case against Apple. As Jeff John Roberts notes in a story for paidContent, Apple seems unlikely to budge, in part because “in the past, Apple has been anything but shy about litigating,” and “in part because the pricing system it used with the publishers (in which [Apple] takes a 30 percent commission) is the same one it uses with providers of other types of content.”
For the publishers, on the other hand, things are different. “Cote’s strong language,” Roberts notes, “reinforces that … the publishers may be in a deep hole.” He continues,
Three of the publishers (Hachette, Harper Collins and Simon & Schuster) have already settled an antitrust lawsuit with the Department of Justice and agreed to change their pricing practices.
The three publishers are also in negotiations with state governments under which they are likely to pay tens of millions in consumer restitution. In plain English, this means that people who bought an e-book in the last few years may receive a small settlement payment.
The publishers appear to have entered negotiations with the states (led by Connecticut and Texas) in order to escape the clutches of the class action lawyers. Any settlement would largely excuse them from having to pay again in the class action suit.
That leaves two publishers — Penguin and Macmillan — as holdouts. Both Macmillan CEO John Sargent and Penguin CEO John Makinson have stated that their companies did nothing wrong.
Unfortunately, it seems they’re going to have to tell it to a judge that already doesn’t believe them.
Dennis Johnson is the founder of MobyLives, and the co-founder and co-publisher of Melville House.