Apple E-Book Consumer Lawsuit Can Proceed as Group Case

Apple Inc. (AAPL) lost its bid to block consumers in 23 states and territories from suing as a group over e-book price fixing as they and state attorneys general seek as much as $840 million in damages.

U.S. District Judge Denise Cote in Manhattan concluded in July that Apple violated antitrust laws in its contracts with e-book publishers. The ruling came after a nonjury trial in cases filed by the U.S. Justice Department and 33 states and territories.

In yesterday’s decision, Cote said consumers in the states and territories that didn’t take part in the trial may pursue their claims together as a class action, which allows plaintiffs to pool resources. Cote plans a separate trial to determine damages to the states and consumers. The Justice Department sought only corrective orders in the case and didn’t ask for damages.

The U.S. sued Apple and five of the biggest publishers in April 2012, claiming the maker of the iPad pushed publishers to sign agreements letting it sell digital copies of their books under a model that raised prices and harmed consumers. In that so-called agency model, publishers, not retailers, set book prices, with Apple getting 30 percent.

The intent was to force Amazon.com (AMZN), the No. 1 e-book seller, to change its pricing model, the government claimed. At the time, Amazon was selling electronic versions of best-selling books for $9.99, which was often below cost.

Photographer: Craig Warga/Bloomberg

U.S. District Judge Denise Cote in Manhattan concluded in July that Apple Inc. violated antitrust laws in its contracts with e-book publishers. Close

U.S. District Judge Denise Cote in Manhattan concluded in July that Apple Inc. violated... Read More

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Photographer: Craig Warga/Bloomberg

U.S. District Judge Denise Cote in Manhattan concluded in July that Apple Inc. violated antitrust laws in its contracts with e-book publishers.

Tripling Damages

In yesterday’s ruling, Cote denied a request by Apple to throw out the opinion of an expert witness who estimates the damages to U.S. consumers at $280 million dollars, which may be tripled under antitrust law. She granted the consumers’ request to exclude the opinions of one Apple expert witness from the case and limited the testimony of another.

Cote must still determine to what extent the class of consumers may use her July ruling to help prove their case.

“We are thrilled about what the certification means for consumers,” Steve Berman, lead lawyer for the consumers, said in a statement yesterday.

Christine Monaghan, a spokeswoman for Cupertino, California-based Apple, didn’t respond to a voice-mail message yesterday seeking comment on the ruling.

iPad Introduction

The trial, which Cote heard from June 3 to June 20, focused on December 2009 and January 2010, when Apple was rushing to sign contracts with the publishers and build an iBookstore in time for the introduction of the iPad.

Cote heard testimony from top publishing executives and from Eddy Cue, the senior Apple executive on the negotiations. She also considered statements and e-mails about the e-books market made by Apple’s deceased founder, Steve Jobs.

Cue, who took the stand for two days, testified that he felt pressure to put together the iBookstore in time for Jobs’s introduction of the iPad, because of the failing health of Jobs, who died in October 2011.

In her July ruling, Cote said Apple “played a central role” in the price-fixing conspiracy with the publishers. Apple is appealing.

The five publishers, Verlagsgruppe Georg von Holtzbrinck GmbH’s Macmillan unit, CBS Corp. (CBS)’s Simon & Schuster, Lagardere SCA (MMB)’s Hachette Book Group, Pearson Plc (PSON)’s Penguin unit and News Corp.’s HarperCollins. The five publishers all settled before trial. Bertelsmann SE’s Random House Inc., the No. 1 publisher, wasn’t involved in the case.

Berman, the lawyer for the consumers, yesterday asked Cote to set the damages trial for July 14. Apple asked for a September trial.

The case is In Re Electronic Books Antitrust Litigation, 11-md-2293, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Mary Romano, Peter Blumberg

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