updated 11:09 pm EDT, Thu July 24, 2014
Doesn't like possibility Apple will pay nothing if found innocent on appeal
In an unsurprising move, US District Court Judge Denise Cote hinted that she may overrule a settlement worked out between Apple and the attorneys general of 33 states and territories along with consumer groups over e-book pricing, expressing "concern" that one of the terms of the deal allows Apple to pay little or nothing if they are ultimately found innocent on appeal. She also objected to another agreed-upon aspect that allowed Apple to pay no interest on the monetary damages while the appeal was in process.
In an agreement forged by and agreed to by both parties, Apple offered to pay $450 million to settle the civil suit over its role in an alleged e-book price-fixing scandal. However, in what could turn out to be a brilliant legal maneuver, the company would owe nothing to the states if it was found innocent of the charges on appeal -- something legal experts have said is a real possibility. Further, the company would only owe $70 million to the states and consumer groups if the conviction was remanded back to Cote rather than reversed or tossed.
"We thought given that unlikely scenario and the legal risk we would face, it would be a good outcome for consumers," said Steve Berman, a lawyer representing the plaintiffs. However, after hearing Judge Cote's concerns about the lack of interest charges on the damages and the lower $70 million payment even if the case was sent back on a minor technicality, Berman said his team would reconsider the deal.
Apple's agreement to settle the case would have been unusually pro-consumer compared to most settlements of this size, requiring that $400 million of the $450 million go directly to consumers rather than attorneys. Apple was found guilty in a bench trial by Judge Cote in 2013 of colluding with major book publishers to "inflate" the prices of e-books by using an "agency model" that allowed publishers to set what they felt were sustainable market prices, rather than the "wholesale model" used predatorily by Amazon to sell e-books at a loss in an effort to shut out competitors and establish itself as the dominant e-bookseller. The action did temporarily raise prices on some best-sellers, but overall the average price of e-books dropped during the period due to increased competition.
Since then, critics' fears about what Amazon would do in a near-monopoly position have begun to come true. The online retail giant has been pursuing more favorable terms for itself that force publishers to sell e-books at discounted rates, using a blackmail-like withdrawal of titles against publishers who refuse to accept the lower rates that has drawn wide criticism from authors and book buyers, but which the company defends as a "normal negotiating tactic."