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TN AG Announces Settlement Proposal from Apple in E-books Price-fixing Case

Press release from Tennessee Attorney General Robert Cooper; July 16, 2014:

Tennessee Attorney General Bob Cooper today announced a proposed settlement of claims for monetary relief against Apple Inc. related to its participation in a price-fixing conspiracy in the market for E-books. The settlement agreement, which remains subject to approval by the U.S. District Court for the Southern District of New York, would resolve claims for consumer damages brought by Tennessee and 32 other states and territories.

Pursuant to the terms of the settlement, the amount to be received by consumers is contingent upon the resolution of Apple’s appeal of the District Court’s July 2013 finding that Apple violated the antitrust laws by orchestrating a conspiracy with five publishers to artificially raise prices for E-books between 2010 and 2012. That appeal is currently pending before the United States Court of Appeals for the Second Circuit. Consumers nationwide (including those represented by private counsel in a related class action) will receive $400 million if the court’s ruling is ultimately affirmed. If the appellate courts do not affirm the court’s ruling, the settlement provides for a smaller recovery, or no recovery if Apple is ultimately determined not to have violated the antitrust laws.

Attorney General Cooper said he is pleased with this settlement, which, combined with previous publisher settlements, will provide consumers with over twice their actual damages, assuming the liability finding is upheld on appeal. Tennessee consumers comprise approximately 1.7 % percent of E-book purchasers in the country.

E-book purchasers nationwide have already received compensation from $166 million in settlement funds paid by the five publishers involved in the conspiracy – Penguin Group (USA), Inc. (now part of Penguin Random House); Holtzbrinck Publishers LLC d/b/a Macmillan; Hachette Book Group Inc.; HarperCollins Publishers LLC; and Simon & Schuster Inc.

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State AG Joins Lawsuit Against Apple, Electronic Book Publishers

Press release from the Office of Attorney General of Tennessee; April 11, 2012:

Tennessee Attorney General Bob Cooper and 15 state attorneys general today filed suit against three of the nation’s largest book publishers and Apple Inc. , alleging they colluded to fix the sales prices of electronic books (e-books). The suit was filed today in U.S. District Court in Austin, Texas. It cites the defendants for violating the States’ antitrust laws and the federal Sherman Antitrust Act.

“The ultimate result with price-fixing is that consumers pay more than they would have in a free marketplace,” Attorney General Cooper said. “Our joint lawsuit alleges three of the nation’s largest publishing companies worked together to gain control of retail prices, allowing publishers to raise the price of e-books.”

The States’ antitrust action stems from a two-year investigation in conjunction with the states attorneys general and the Department of Justice, into allegations that the defendants conspired to raise e-book prices. For years, retailers traditionally sold e-books through a wholesale distribution model, under which retailers rather than publishers set e-books’ sales prices. However, the investigation alleged revealed that Penguin, Simon & Schuster and Macmillan conspired with other publishers and Apple to artificially raise prices by imposing a distribution model in which the publishers set the prices for bestsellers at $12.99 and $14.99.

When Apple prepared to enter the e-book market, the publishers and Apple agreed to adopt an agency distribution model as a mechanism to allow them to fix prices. To enforce their price-fixing scheme, the publishers and Apple relied on contract terms that forced all e-book outlets to sell their products at the same price. Because the publishers agreed to use the same prices, retail price competition was eliminated. According to the States’ enforcement action, the coordinated agreement to fix prices resulted in e-book customers paying more than $100 million in overcharges.

Today’s action seeks to reverse the effects of the defendants’ anti-competitive conduct as well as pay damages for customers who paid artificially inflated prices for e-books.

The states have reached an agreement in principle with Harper Collins and Hachette to provide significant consumer restitution nationwide and injunctive relief.

Those participating in today’s enforcement action include Alaska, Arizona, Colorado, Connecticut, Illinois, Iowa, Maryland, Missouri, Ohio, Pennsylvania, South Dakota, Tennessee, Texas, Vermont and West Virginia.