July 16 (Bloomberg) -- Apple Inc. agreed to pay as much as $450 million to settle allegations by U.S. states and consumers that it helped fix prices of electronic books, according to a court filing.
The Cupertino, California-based technology company was set to face trial this month in Manhattan federal court on claims brought on behalf of more than 30 states and U.S. territories as well as consumers, in which it faced as much as $840 million in damages.
A lawyer told U.S. District Judge Denise Cote in June that the parties had signed a “binding agreement in principle.” Details of the agreement were filed with the court today.
Cote ruled last year in a case filed by the U.S. Justice Department that Apple orchestrated a price-fixing conspiracy among five of the biggest publishing companies in violation of U.S. antitrust law. Apple has appealed that ruling, which the consumers and states had been using to try to recover damages from the iPhone maker.
The settlement is contingent on the outcome of the appeal. If the decision is affirmed, Apple will owe $400 million to consumers and $50 million to states and for attorney fees, according to the documents filed today. If the case goes back to trial, Apple will pay $50 million to consumers and $20 million for attorney fees and to states. If the decision is thrown out, Apple won’t have to pay anything.
“This settlement proves that even the biggest, most powerful companies in the world must play by the same rules as everyone else,” New York Attorney General Eric Schneiderman said in a statement. “Our settlement has the potential to result in Apple paying hundreds of millions of dollars to consumers to compensate them for paying unlawfully inflated e-book prices.”
States and consumers have recovered $166 million from earlier settlements with publishers in the case, including Hachette Book Group, HarperCollins Publishers LLC, Simon & Schuster Inc., Pearson Plc’s Penguin Group and Verlagsgruppe Georg von Holtzbrinck GmbH’s Macmillan unit. The settlement with Apple requires approval from the judge.
“Apple did not conspire to fix e-book pricing and we will continue to fight those allegations,” said Kristin Huguet, a spokeswoman for Apple. “We believe a fair assessment of the facts will show it.”
Spurred by increasing use of tablets and smartphones for reading, e-book revenue is growing even while sales of physical books are decreasing. Printed-book sales in the U.S. are projected to fall to $19.5 billion this year from $26 billion in 2010, while e-book revenue is anticipated to jump more than eightfold to $8.7 billion, according to Forrester Research.
States led by Texas and Connecticut, along with lawyers for the consumers, began their investigations in 2010 after prices for several publishers’ e-books increased 30 percent to 50 percent “nearly simultaneously,” attorneys for the states and consumers said in court filings today. The Department of Justice conducted a separate investigation.
“This settlement –- contingent on the outcome of Apple’s appeal –- represents a fair and equitable effort by all parties to resolve this litigation,” Connecticut Attorney General George Jepsen said in a statement.’’
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: Christie Smythe in Brooklyn at firstname.lastname@example.org
To contact the editors responsible for this story: Michael Hytha at email@example.com David Glovin, Charles Carter