Attorneys last week submitted the details of an agreement that, if approved, would settle the damages phase of Apple’s e-book price-fixing case. And, befitting a case that has taken more than a few twists and turns over the last three years of complex litigation, the proposed settlement terms raise a number of questions, and it could be months, even years, before we get the answers. Here are five core questions to be decided:
How Much Will Apple Pay?
According to the settlement document, if Judge Denise Cote’s 2013 liability finding against Apple is upheld, Apple will refund a hefty $400 million to consumers. If the decision is vacated and remanded to Cote for further proceedings, Apple will refund $50 million. And, if the decision is reversed, Apple will pay nothing. The agreement also calls for separate payment of attorney fees and fines, up to $50 million, if Apple’s liability is upheld.
How Much Will My Refund Be?
Under the proposed terms, the parties will basically use the same formula that was used to administer the publishers’ settlements, with payments varying for New York Times bestsellers vs. non-bestsellers. Before disbursement, the final amounts will be adjusted to ensure that as much of the money as possible reaches consumers. The $166 million in publisher refunds was divided among just over 23 million e-book accounts, and that’s roughly the same pool that will share Apple’s settlement. The publishers’ settlements resulted in payments of $3.17 for New York Times bestsellers, and 73 cents for all other titles. Obviously, the final amount consumers will receive in this case depends on the answer to question one—if it’s $400 million, they’ll get more, if it is $50 million, they will get less. And if Apple wins its appeal, nothing.
When Will The Refunds Happen?
The short answer: not any time soon. While the parties have asked the court for preliminary approval, they also asked to delay the final approval process, including notice to consumers, until Apple’s appeal has been decided by the courts. That final determination could be many months, even years away, considering that the settlement affords both parties the option to appeal all the way to the Supreme Court. After Apple’s liability question has run its legal course, the final approval process will begin. And that, too, will take some time—there must be a class notice period, and there could be a public comment period and a fairness hearing. Then, of course, there are the logistics of actually distributing the funds to consumers.
What Does This Mean for the Publishers?
For the publishers, the settlement is potentially good news. After all, on its face, the settlement represents an injection of as much as $400 million into consumer accounts that will at some point flow to publishers through book and e-book sales, right? Well, maybe.
Unlike the publisher settlements, which mandated that consumer refunds could only be spent on books (print or digital), the Apple refunds can be spent on any “product or service” offered by the retailer credited. Given that Amazon represents the largest retailer, and it sells just about everything... well, you get the picture. Also, it’s worth noting that some portion of Apple’s money will go to Apple customer accounts (hello iTunes).
Still, if Apple’s liability is upheld, a good chunk of Apple’s settlement money will undoubtedly make its way back to publishers. Which has to leave the publishers somewhat conflicted: while they would love to claim vindication if Apple’s price-fixing verdict is reversed, that vindication would cost them millions in sales.
So, This Is Almost Over, Right?
Well, no. When you hear the word “settlement,” you think closure. But the contingencies in this deal mean that there’s a lot of heavy lifting left to do.
Already Cote has suggested that there may be details to iron out before she grants preliminary approval, specifically regarding the parties’ request to delay notice to consumers, although it is highly unlikely that would turn out to be a fatal flaw. But there are still filings and oral arguments to be made before the Second Circuit, and potentially further appeals after that. Throughout the litigation, Cote has found this matter to be a “straightforward” case of price fixing. We’ll soon see if the appeals court agrees.
Meanwhile, another legal front has opened. In June, Cote refused to dismiss an antitrust suit lodged by three upstart e-book retailers that claim the switch to agency pricing destroyed them. The parties in that case are due in court next month. And until the case is settled or otherwise dispatched, litigation stemming from the 2010 agency switch will continue.