Apple

U.S. judge OKs class action in e-book suit against Apple

29 March 2014

From Reuters:

A federal judge in New York granted class certification on Friday to a group of consumers who sued Apple Inc for conspiring with five major publishers to fix e-book prices in violation of antitrust law.

U.S. District Judge Denise Cote said the plaintiffs had “more than met their burden” to allow them to sue as a group. She rejected Apple’s contentions that the claims were too different from each other, or that some plaintiffs were not harmed because some e-book prices fell.

“This is a paradigmatic antitrust class action,” wrote Cote, who has scheduled a trial later this year to determine damages, which could reach hundreds of millions of dollars.

. . . .

Cote on Friday also denied Apple’s motion to exclude the opinions of the plaintiffs’ damages expert. In a separate ruling, Cote largely threw out the opinions of Apple’s two damages experts, saying they were not based on “rigorous application of economic methods.”

Link to the rest at Reuters and thanks to BS for the tip.

Apple, Publishers Battle New E-book Antitrust Claims

28 March 2014

From Publishers Weekly:

In two January motions, Apple and the five major publishers involved in a 2010 e-book price-fixing conspiracy asked Judge Denise Cote to dismiss a follow-up suit from an Australian e-book retailer that claimed its business was destroyed by the 2010 agency switch. But since March 14, two new plaintiffs have joined the action, raising the possibility of another legal front opening in the e-book antitrust battle—this one involving aggrieved retailers.

In DNAML vs. Apple Inc. et al, filed in September, 2013, the upstart Australian e-book retailer alleges the company was harmed “directly and as a proximate result” of the 2010 price-fixing scheme executed by Apple and the five agency publishers (Hachette, HarperCollins, Simon & Schuster, Macmillan and Penguin). Now, this month, two related cases have been accepted by Cote: one filed by Lavoho, LLC, a “successor” to the Diesel eBook Store; and another from Abbey House Media, formerly BooksonBoard.

The most recent suits offer virtually identical claims to DNAML’s 2013 suit—that the 2010 agency switch destroyed the retailers’ ability to compete on price.

. . . .

The suits contain nearly identical preambles detailing Apple’s liability finding by Judge Cote, and they press nearly identical claims: that the illegal collusion between Apple and the publishers ended the retailers’ ability to bundle, discount, promote or otherwise engage in retail price competition, thus destroying each nascent e-book business. In each complaint, the plaintiffs were said to have business models “predicated on aggressive price competition.”

. . . .

The Diesel e-bookstore (now Lovoho), was founded in 2005 by Scott Redford. It claims to have offered over three million titles and “the cornerstone” of its business model was also discounted bundling, including “proprietary software that would allow its e-bookstore to ‘shrink wrap’ up to six digital e-books and sell them as a bundle to the consumer.” Diesel also offered a rewards program. Diesel had enjoyed steady growth “every single year,” the suit claims, with “modest profits” and a “large expansion” planned for 2011.

Everything suddenly changed, however, after the agency switch in 2010. Each suit claims the plaintiffs “did not want to agree to the agency agreements,” but “had virtually no choice but to sign them” if they wanted to sell the publishers’ books.

. . . .

Just as Amazon was forced to raise prices, the suits claim, each of the plaintiffs was “forced to stop discounting its prices and cease using its already developed discount-driven promotional tools.”

Link to the rest at Publishers Weekly and thanks to Russell for the tip.

The bone-headed scheme hatched by the leaders of Big Publishing just keeps on rolling along.

PG says Amazon Derangement Syndrome is an expensive affliction.

The absurd ebook case: Apple fights on as consumers spend settlement money at Amazon

26 March 2014

From GigaOm:

The high-fives must have been flying at Amazon this morning: millions of the company’s customers got notices to spend credits at its Kindle store, and Amazon didn’t have to pay a cent. Meanwhile, rival Apple will likely underwrite aneven bigger shopping spree for Amazon customers sometime yet year.

Welcome to the ironic denouement of l’affaire ebooks, which reached a climax in 2013 when a federal judge found that Apple had brokered a conspiracy with book publishers to fix prices. The legal tussle resulted in the publishers settling their cases — which is what paid for the customer credits that went out today — while Apple fought on alone.

For now, the biggest winner is Amazon, which already dominated the ebook market at the time of the price-fixing scheme in 2010. Today, as a result of lawsuits brought by the Justice Department and state governments, Amazon is in an even stronger position with the publishers; it will also get a healthy cut of the $160 million or so that the publishers agreed to pay under a settlement.

. . . .

For Apple, which chose to fight rather than settle, it’s a whole different story. Right now, the company is in the midst of high legal torture at the hands of a hostile judge, class action lawyers, state attorneys general and the Justice Department.

Recent court records show that the class action lawyers and the states want Apple to pay damages of $280,254,374; they will then seek to triple that amount under special penalty provisions — which would result in a final bill close to $1 billion. The damages trial is set to start in May and, if Apple loses, consumers (and indirectly Amazon) can expect to receive another bushel of ebook credits next year.

Link to the rest at GigaOm and thanks to Matthew for the tip.

Is Apple Now the No. 2 Ebook Retailer in the U.S.?

25 March 2014

From Digital Book World:

Over the past month, I’ve spoken to over a dozen large, medium and small publishers of ebooks and a handful of important ebook distributors which cater to indie authors. Many of them have shared with me their ebook retailer market share breakdown for the past three months (December, January and February). At the same time, due to the sensitivity of the matter (no publisher wants to publicly acknowledge what percentage of revenue comes from Amazon, for instance), many publishers officially declined to share data with me.

. . . .

Among the largest publishers, Barnes & Noble seems to still be solidly No. 2 behind Amazon, but both Apple and Amazon are gaining market share and B&N is losing it.

. . . .

One surprise in looking at large publishers is that Google kept on coming up as a retailer that is gaining market share.

. . . .

Among medium-sized publishers, Apple and Barnes & Noble are closer.

Among the medium-sized publishers I spoke with, some are making more money with Apple, and some with B&N. I was told that month-to-month, genre-to-genre and book-to-book it changes.

Among small publishers, Apple seems to have taken the market share lead.

I was told by small publishers that Apple has become very attentive to their needs while the opposite has happened at Barnes & Noble. Apple’s efforts, they told me, have paid off.

At a small publisher, one book can make a huge difference in retailer market-share over the course of a month. I was told several stories of how clever marketing by Apple for titles with momentum resulted in huge market-share swings in Apple’s direction over the course of a month or two. I was even told by one small publisher that for one book, Apple far eclipsed Amazon in sales.

Among indie authors, Barnes & Noble is likely the leader still, but it’s unclear.

One major distributor had Barnes & Noble in the lead, but not by much and with the margin shrinking. Another said Apple was far ahead.

“Apple is our No. 2 ebook retailer over the past year – and a strong No. 2,” said Matt Cavnar, co-founder of Vook, which distributes about 5,000 ebooks for authors, small- and medium-sized publishers and its own publishing operations.

. . . .

Among all categories, Amazon seems to be gaining market share.

Among all the groups we spoke with, the overall narrative seemed to be that Amazon and Apple were gaining market share and that Barnes & Noble was losing it.

The going thinking right now is that the shift away from agency pricing by the largest publishers has helped Amazon grow its ebook market share because it’s doing the most discounting. I don’t think that’s quite right. Amazon’s competitors are discounting, too.

What I think has happened is that because Nook, for instance, is now selling many, many titles without making a profit (or at a loss — I’m talking about best-selling titles from the publishers which were previously agency), the bleeding of 2011 and 2012, when the company was losing hundreds of millions of dollars a year, has turned to a full-on hemorrhage.

Link to the rest at Digital Book World

Amazon Distributing Antitrust Settlement Proceeds

25 March 2014

Amazon customers in the US are receiving emails today announcing credits being applied to their Amazon accounts.

Here’s an excerpt from the email:

The credit results from legal settlements reached with publishers Hachette, HarperCollins, Simon & Schuster, Macmillan, and Penguin in antitrust lawsuits filed by State Attorneys General and Class Plaintiffs about the price of eBooks.

You don’t have to do anything to claim your credit, we have already added your credit to your Amazon account.

The amount of the credit will depend upon how many ebooks the Amazon customer purchased and whether those ebooks were New York Times bestsellers or not. The settlement provides for payment of $3.17 for NYT bestsellers and $0.73 for all other ebooks.

Here’s more on the settlements:

You are included in the Settlements if:
1. You purchased an E-book that was published by one of the five Publishers (all of the Publishers publish books under many different names, called imprints, See Question 6), and
2. Your purchase was made from April 1, 2010 through May 21, 2012, and
3. You were a resident of 1) a U.S. state or commonwealth, 2) the District of Columbia, or 3) one of the five U.S. Territories at the time of purchase. The billing address of the credit card you used to buy the included E-book(s) will be used to determine your residency.

The following people or entities are not included in the Settlements:
1. Residents of countries other than the United States and its territories and commonwealths are not included in the Settlements.
2. Only individuals are included.  Business, governments, libraries, non-profits, and other entities are not included.
3. Rental E-books, free E-books, and E-books received as gifts only are not included. (Only purchased E-books are included in the Settlements.  If you received an E-book as a gift, your gift is not included.  The person who purchased it for you may be included.)

For more settlement information, you can go to a website created by the state attorneys general who pursued the antitrust lawsuit against the big publishers and Apple. Here’s a link to the FAQ.

To avoid any confusion, Amazon is not paying any money to its customers because it was not charged with any antitrust violation. The money being distributed to Amazon customers is coming from:

  • Holtzbrinck Publishers, LLC, known as Macmillan (“Macmillan”);
  • Penguin Group (USA) Inc. (“Penguin).
  • Hachette Book Group, Inc. (“Hachette”);
  • HarperCollins Publishers LLC (“HarperCollins”); and
  • Simon & Schuster, Inc. and Simon & Schuster Digital Sales, Inc. (“Simon & Schuster”).

Apple is still fighting this antitrust case and has not settled.

Apple and Google’s wage-fixing cartel involved dozens more companies, over one million employees

25 March 2014

Meryl, who sent this tip, pointed out a connection between Apple’s behavior in the Price-Fix Six price-fixing antitrust suit and the wage-fixing cartel.

From PandoDaily:

Back in January, I wrote about “The Techtopus” — an illegal agreement between seven tech giants, including Apple, Google, and Intel, to suppress wages for tens of thousands of tech employees. The agreement prompted a Department of Justice investigation, resulting in a settlement in which the companies agreed to curb their restricting hiring deals. The same companies were then hit with a civil suit by employees affected by the agreements.

This week, as the final summary judgement for the resulting class action suit looms, and several of the companies mentioned (Intuit, Pixar and Lucasfilm) scramble to settle out of court, Pando has obtained court documents (embedded below) which show shocking evidence of a much larger conspiracy, reaching far beyond Silicon Valley.

Confidential internal Google and Apple memos, buried within piles of court dockets and reviewed by PandoDaily, clearly show that what began as a secret cartel agreement between Apple’s Steve Jobs and Google’s Eric Schmidt to illegally fix the labor market for hi-tech workers, expanded within a few years to include companies ranging from Dell, IBM, eBay and Microsoft, to Comcast, Clear Channel, Dreamworks, and London-based public relations behemoth WPP. All told, the combined workforces of the companies involved totals well over a million employees.

. . . .

Although the Department ultimately decided to focus its attention on just Adobe, Apple, Google, Intel, Intuit, Lucasfilm and Pixar, the emails and memos clearly name dozens more companies which, at least as far as Google and Apple executives were concerned, formed part of their wage-fixing cartel.

. . . .

A confidential Google memo (above, left) titled “Special Agreement Hiring Policy,” dating from November 2006, divides the company’s wage-fixing agreements into two categories: “Do Not Cold Call” and “Sensitive Companies.” Below that, the Google memo offers a brief chronology and list of companies:

The following companies have special agreements with Google and are part of the “Do Not Cold Call” list.

The first entry marks the beginning of Google’s participation in the wage-suppression scheme:

Effective March 6, 2005:

• Genentech, Inc.
• Intel Corporation
• Apple Computer
• Paypal, Inc.
• Comcast Corporation

Until now, neither Paypal (owned by eBay), Comcast nor Genentech have been publicly mentioned as part of the wage-suppression cartel.

. . . .

The “effective date” of Google’s first wage-fixing agreements, early March 2005, follows a few weeks after Steve Jobs threatened Google’s Sergey Brin to stop all recruiting at Apple: “if you hire a single one of these people,” Jobs emailed Brin, “that means war.”

Jobs threatened Brin and Google on February 17, 2005; nine days later, Apple’s VP for Human Resources sent out an internal email to Apple recruiting,

All,

Please add Google to your “hands-off” list. We recently agreed not to recruit from one another so if you hear of any recruiting they are doing against us, please be sure to let me know.

Please also be sure to honor our side of the deal.

That was February 26; on March 6, Google’s identical non-solicitation agreement with Apple became “effective.”

This timeline is important to establish because it demonstrates precisely what makes this scheme illegal: secret cross-agreements between two or more parties to fix wages in the labor market, at a time when tech engineer wages were soaring, threatening profits.

. . . .

From that point on, the secret cartel expanded. Later that year, in September 2005, eBay CEO Meg Whitman called Schmidt complaining that Google’s recruiters were hurting profits and business at eBay. Schmidt emailed Google’s “Executive Management Committee”—the company’s top executives— summarizing Whitman’s, and “the valley”’s view that competing for workers by offering higher pay packages was “unfair”:

. . . .

From: Eric Schmidt
Sent: Wednesday, September 7, 2005 10:52 PM
Subject: Phone call from Meg Whitman

DO NOT FORWARD

Meg called to talk about our hiring practices. Here is what she said:

1. Google is the talk of the valley because we are driving up salaries across the board. People are just waiting for us to fall and get back at us for our “unfair” practices now.

2. Our recruiting practices are “zero sum” and it appears that somewhere in Google we are targeting EBay to “hurt them” and its the reputation that we are doing this against Yahoo, EBay and MSFT (I denied this.)

Schmidt’s email clearly prioritizes Whitman’s and other CEOs’ concerns over the rights of employees or the concept of fair competition, even ordering a Google executive to “fire the recruiter [who offended Whitman] immediately.”

Link to the rest at PandoDailey

PG says pushing ebook prices up or employee wages down doesn’t speak well for Apple.

Plaintiffs: No ‘Do-Overs’ For Apple in E-book Case

13 March 2014

From Publishers Weekly:

Will there be a damages trial for Apple in Judge Denise Cote’s Manhattan courtroom this spring? Maybe not: In the final round of briefs before the its scheduled May trial, attorneys for the plaintiff consumer class argue that there is sufficient evidence for Cote to assess damages against Apple via summary judgment, no trial necessary. However, if the court declines to issue a summary judgment, the trial should go on as planned in New York, the plaintiffs argue in a separate brief, rejecting Apple’s call for the judge to remand the state and consumer class actions to their original jurisdictions.

“Apple wants a do-over of almost every fact and argument decided against it in the liability trial,” plaintiff attorneys state in their final reply brief, submitted last week. But a summary judgment in which the court determines a damage award is merited, the plaintiffs argue, because Apple has failed to show that “triable issues of material fact exist” that would rebut the plaintiff’s “evidence of impact and damages.” The plaintiffs have put Apple’s damages for fixing e-book prices between $697 and $840 million.

. . . .

In sum, the plaintiffs argue that summary judgment is proper because there is no genuine dispute that consumers were damaged by the price-fixing conspiracy, only by how much. “Every expert who has opined on how much the conspiracy caused the Publisher Defendants’ e-book prices to increase has landed within a few percentage points of Dr. Noll’s 18.1% damages figure, including Apple’s own experts,” the plaintiff’s argue.

As to Apple’s argument that Judge Cote is biased, based on statements made at previous hearings, the plaintiffs call the argument “cursory,” lacking “authority,” and “worth little attention.”

Link to the rest at Publishers Weekly

Apple’s e-book appeal: Toss out the verdict, or give us a new judge

27 February 2014

From Fortune:

Apple pulled no punches in the 65-page brief it filed Tuesday, asking a higher court to overturn the controversial results of last year’s e-book antitrust trial and placing blame for the outcome squarely on the shoulders of the judge who heard the case.

In Apple’s view, U.S. District Judge Denise Cote was not only wrong about the law when she ruled that the company orchestrated a conspiracy with publishers to fix the price of e-books, she was wrong about the facts as well.

The key issue of law is the same one that was raised at trial: That the antitrust rules that restrain the actions of direct competitors are not the same as those governing the actions of a vertical player — as Apple was in its dealings with the publishers.

. . . .

“Apple’s entry into the conspiracy had to start somewhere,” Judge Cote wrote in her July 2013 decision, “and the evidence is that it started at those initial [Dec. 2009] meetings in New York City with the Publishers” when the company “made a conscious commitment” to join a pre-existing conspiracy to violate the Sherman Antitrust Act.

“This finding forms the bedrock of the court’s entire decision and is demonstrably wrong,” Apple told the U.S. Court of Appeals, Second Circuit. “The undisputed record reflects that Apple had no prior dealings in the publishing industry and that everything it knew it had gleaned from public sources—like reports in The New York Times and The Wall Street Journal—none of which reported on a conspiracy.”

Apple knew before those initial meetings that the publishers were frustrated with Amazon, which at the time controlled nearly 90% of the e-book market. They hated that Amazon was selling their most popular titles for $9.99 — below cost — and were afraid of getting squeezed out of what little profit they still had. The judge herself recognized that Amazon’s dominant position “strengthened [Apple's] hand in proposing [a] new business model to the Publishers.”

“Apple seized the moment and brilliantly played its hand,” she wrote.

Steve Jobs later called this an “aikido move,” referring to a Japanese martial arts maneuver that uses the power of a stronger opponent against itself.

Link to the rest at Fortune

PG hasn’t read Apple’s brief, but, based on various reports, thinks this sounds like a moon shot.

A general rule of appellate law is that, absent unusual circumstances, the appeals court will accept the trial court’s decisions with respect to the facts of a case. 99% of appeals are based upon the idea that the judge got the law wrong, not the facts.

Cases like this generate a massive amount of paperwork and PG hasn’t read it all. He did, however, read the judge’s opinion and found it to be exceptionally detailed and compelling. In all the right ways, Judge Cote did a good job at making her opinion difficult for Apple to appeal.

Additionally, Judge Cote is a senior judge, which means she is semi-retired but is available for assignment to some cases. She has a great deal of experience being a judge and, unless she has a history of flaky decisions (which PG hasn’t read anything about), the 2nd Circuit Court of Appeals will be familiar with her past work, thus giving her opinion a bit more credibility than it would have if it were written by a new Federal District judge.

The judge’s decision made Apple and the publishers’ actions sound like the most garden-variety of price-fixing cases. It appears Apple’s counsel is going to great lengths to attempt to distinguish it from the dozens of other antitrust cases where business executives have acted like fools trying to manipulate prices.

Apple Wants to Move E-book Damages Trial

26 February 2014

From Publishers Weekley:

Apple is seeking to escape from New York: In a filing made public this week, Apple has moved to have its pending state and class action trial over e-book price-fixing damages remanded to the courts they originated in. For the consumer class action, that would mean a potential home court advantage for Apple, as the case would be moved to the Northern District of California, while the states’ action could be moved to the Western District of Texas.

. . . .

The filing acknowledges that Apple’s remaining motion to dismiss the class action case against it, as well as the plaintiff’s motion for class certification (which Apple has opposed) are still pending before Judge Cote. But after Judge Cote issues rulings on those motions, Apple argues, any case going forward to trial should be remanded to courts in Northern California and Texas before April 11, 2014, when the parties are scheduled to submit joint pretrial orders, as required by this Court’s trial procedures.

Link to the rest at Publishers Weekly

Apple Loses Bid to Delay E-Books Antitrust Monitor

11 February 2014

From Bloomberg:

A federal appeals court in New York yesterday denied Apple’s request that it temporarily block the activities of the monitor, Michael Bromwich, while the company appeals a July order by U.S. District Judge Denise Cote in Manhattan.

The Cupertino, California-based company challenged the monitor, imposed by Cote after she concluded after a non-jury trial in July that Apple schemed with publishers to limit retail price competition and raise e-book prices.

. . . .

The appeals court in its ruling yesterday cited the Justice Department’s interpretation that Cote’s order which the U.S. said allowed Bromwich to assess Apple’s antitrust compliance programs, not to investigate whether Apple executives are complying with the law. Bromwich may demand documents and interviews relevant to those duties, the court said, summarizing the government’s argument.

“We agree with that interpretation of the district court’s order,” the appeals court said.

. . . .

The “ruling makes abundantly clear that Apple must now cooperate with the court-appointed monitor,” Gina Talamona, a spokeswoman for the Justice Department, said in a statement.

Link to the rest at Bloomberg

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