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E-Book Price Setting: A Trend That Began 10 Years Ago?

Published onNov 18, 2022
E-Book Price Setting: A Trend That Began 10 Years Ago?

On 8/31/2022 U.S. Magistrate Judge Valeria Figueredo of the New York federal court, recommended to dismiss a case against Amazon and five other publishers for alleged e-book price setting. The original suit began in early in 2021, when Amazon and five other publishers were accused in a class action lawsuit of driving the price of e-books up by 30%, therefore, raising anti-trust concerns.

The class action directly spoke to concerns about claims of violations of the Sherman Act, 15 U.S.C. § 1, 2 and the Robinson-Patman Act. The case revolved around a Most Favored Nation Provision (MFN), and Magistrate Figueredo noted that the complaint was focused mainly on distribution agreements. Magistrate Figueredo stated that the distribution agreements were not “inherently illegal”.

As of September 15, 2022 Amazon and the Publishers (Simon & Schuseter, Hachette, HarperCollins, MacMillan, and Penguin Random House)  are seeking to have the case dismissed by arguing that (1) they made a prudent business decision to work with Amazon and (2) the Plaintiffs failed to address Magistrate Figueredos’ conclusion that the Publisher agreements with Amazon are not direct evidence of conspiracy.

The Plaintiffs (the e-book buyers in the class action suit), on the other hand, argue that the distribution agreements need to be looked at as a whole, as opposed to looking at each individual agreement between Amazon and each individual publisher. Additionally, the plaintiffs have argued that this is nothing new for the e-book industry, and that publishers are simply continuing a trend that they started nearly ten years ago with Apple.

This reference to a previous case that involved Apple indicates that the parties and the court are digging into the differences between the two cases. Moreover, Magistrate Figueredo even noted the case differences when recommending that the court to dismiss the current Amazon case.

The similar case referenced dates back to 2012 when Apple and other publishers were accused of e-book price setting and conspiracy. The United States District Court for the Southern District of New York, held in the case against Apple that “Publisher Defendants conspired with each other to eliminate retail price competition in order to raise e-book prices, and that Apple played a central role in facilitating and executing that conspiracy.”

The publishers in the Apple case consisted of five of the six largest publishers of “trade books” in the United States. The publishers were Hachette, HarperCollins, MacMillan, Penguin Random House, and Simon & Schuster. Interestingly enough, all the same publishers are present in the Amazon case: Simon & Schuseter, Hachette, HarperCollins, MacMillan, and Penguin Random House.

In United States v. Apple inc., however, the agreements with publishers consisted of “functionally-identical agreements with Apple” and would utilize the agency model, price-based “most favored nation” clause, and established price tiers. These aspects, combined with other meetings and further evidence (such as time in relation to the iPad launch and various other meetings between parties), are what led to many of the publishers settling while Apple received a final judgement not in its favor which required the termination of the Agency Agreements with the publishers.

In the current class action against Amazon and the Publishers, Amazon is looking to distance itself from the previous Apple case and avoid the judgement that Apple received just 10 years ago.

 In Amazon’s response to the Plaintiff’s objection to Magistrate Judge Figueredo’s Report and Recommendation, Amazon made sure to underscore that this is a different case; stating, “Amazon is not Apple, this is not the Apple case.” This shows the link of the other case being on the forefront of parties’ minds.

Despite these similar facts and parties (at least on the part of the publishers), Magistrate Figueredo concluded, “even if a prior conspiracy were probative of a present conspiracy,” the “unique circumstances surrounding the Apple conspiracy” does not “plausibly suggest a conspiracy among the Publishers again here.”

In turn, it looks like the trend is that the outside circumstances surrounding the agreements are particularly important and can shed more light on actions of conspiracy beyond just the text of the individual agreements between the publishers and giants such as Amazon. In Apple’s case the launch of the iBookstore and iPad at the time as well helped guide the court to determine Apple’s conspiracy.

Here, it appears that the same outside factors do not apply. In turn, Amazon is attempting to distance itself enough from the Apple verdict from the years past. For now, it seems that Magistrate Figueredo is leaning towards yes Amazon is succeeding in differentiating itself. Although, others are still making the case that a revised complaint might lead to a different outcome, and Judge Woods at the end of September stated the court “cannot conclude that a further amendment of the complaint would be futile.”

Alaina Rodriguez is a second-year law student at Wake Forest University School of Law. Before attending Wake, she worked for Accenture Federal Services as a Management Consultant developing mobile and desktop applications. Alaina received her undergraduate degree from the University of Virginia with a double major in Foreign Affairs and Spanish.

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