More details have emerged concerning the deal to settle e-book price-fixing claims between 54 states and U.S. territories and HarperCollins, Hachette, and Simon & Schuster.Under terms of the settlement filed with the court this week, Hachette will pay $31,711,425; HarperCollins: $19,575,246; and Simon & Schuster: $17,752,480. And consumers who bought e-books from April 1, 2010 to May 21, 2012, meanwhile, will eventually be able to claim a check or a credit of up to $1.32 per e-book pending the deal’s approval by the court. And thanks to the digital trail that comes with e-books, the process should move quickly and easily—that is, once it makes it out of the courts.
According to Jaclyn M. Falkowski, executive assistant for press and communications for the Connecticut Office of the Attorney General, the distribution process will begin upon “preliminary approval” by the court, at which time notice of the settlement will go out to consumers directly from the retailers from whom they purchased their e-books—for example, Amazon, Barnes & Noble, etc. Notice will be made by e-mail, and also via advertising in newspapers and other media. In order to protect privacy, consumers will be identified by “unique numbers” rather than by name.
To receive a credit, customers do not need to take any action once notified. They may, however, choose to receive a check from the settlement fund for the amount due them, or to opt out of the settlement entirely. But if the consumer does not choose either of those options within 60 days after notification, a “calculated credit” will be applied directly to the consumer’s retailer accounts. The credit can be applied to future purchases of either print or e-books.
According to the supporting motion, the parties agreed to a formula for allotting the settlement funds that distinguishes between bestsellers, frontlist, and backlist books, constructed with the help of University of Texas Law Professor Abraham Wickelgren. For each e-book that was on a New York Times bestseller list (Fiction, Non-Fiction, and Advice) the distribution will be $1.32 per unit; for books not on the New York Times Bestseller list, and sold within a year of initial publication (frontlist), the distribution will be $0.36 per book. For each book that was not on the New York Times Bestseller list and was sold more than one-year following initial publication (backlist), the distribution will be $0.25 per book. For books which cannot be determined to be frontlist or backlist, consumers will receive a blended credit of $0.30 per unit. (Note: distribution amounts in an appendix submitted with the filings differ by a penny for bestsellers ($1.33) and frontlist books ($.037).
“As an example,” the brief states, a consumer who purchased 10 New York Times bestsellers published by HarperCollins, 10 frontlist books published by Macmillan, and 10 backlist books published by Simon & Schuster from April I, 20 I0 to May 21, 2012 would be entitled to compensation totaling $19.30 (10 x 1.32 + 10x .36 + 10 x .25).”
The process differs slightly for those who bought their e-books from Google, or Sony, they will only be able to get checks—but those sales, notably, account for less than 2% of all e-book sales covered by the settlement, Falkowski noted. The court filing, meanwhile, asserts that 97% of all sales came from Amazon, B&N, or Apple. The settlement also proposes to compensate those who purchased e-books from non-settling publishers Macmillan and Penguin, while the states pursue litigation against them.
Once the court approves the final settlement, most of the checks and credits will be issued within 30 days. But don't count your windfall just yet. “To be clear, neither the checks nor the credits will be available until after the court grants final approval, Falkowski stressed, noting that the process “will take many months.” In addition to the financial relief in the settlement, there is also injunctive relief, with the terms of the Proposed Final Judgment in the DoJ's case to be automatically incorporated into the settlement.
The states' motion supporting approval of the settlement also details some of the background of the case, citing a “a two-year investigation by the States of Texas and Connecticut, coordinated with a separate investigation by the United States Department of Justice ("DOJ").” In all the states reviewed “over 250,000 responsive documents and 300 interrogatory responses,” including emails “between and among the conspirators' chief executive officers,” as well as “phone logs and other records" that allegedly evidenced "communications and agreement among them.”
It certainly sounds as if the settlement did not come easily. “Negotiations were lengthy, often adversarial and time-consuming,” the brief notes, adding that all three publishers “strongly deny” any wrongdoing. “They assert their actions were merely parallel, unilateral, or justified by market forces and completely legal. Settling Publishers also argue that their actions had procompetitive effects on the e-book market and that some E-book prices decreased after the adoption of the agency model.” The states, however, countered that its “evidence to the contrary” is “remarkably strong.”