E-Books Trial Judge Not Satisfied With Terms of Apple’s Settlement

Source: Thinkstock

The judge responsible for approving Apple’s (NASDAQ:AAPL) proposed e-book price-fixing settlement has expressed concerns about certain provisions of the deal that could substantially reduce the final amount that is paid to consumers. Reuters reports that the settlement Apple has agreed to would require the company to pay $450 million to settle with consumers that alleged they were harmed by the illegal e-book price-fixing conspiracy the company orchestrated with five publishers.

However, the final size of the damages award depends on how Apple’s appeal of U.S. District Judge Denise Cote’s original liability finding against the company plays out. Under the terms of the current settlement deal, Apple would pay $450 million, with $400 million going to consumers if it loses its appeal. A successful appeal that remands the case to the district court could reduce the damages award to $70 million, with only $50 million going to consumers. There is also the possibility that the Second U.S. Circuit Court of Appeals could completely overturn Cote’s liability finding, in which case Apple would pay nothing at all.

In a conference call, Cote said the “most troubling” provision in the current settlement deal was the one that could reduce Apple’s payment to $70 million if the liability finding was reversed over a minor issue. “I’m concerned about the terms of the settlement,” said Cote, per Reuters. She also expressed concern about the lack of any requirement for Apple to pay interest on its damages payout while it made its appeals.

Steve Berman, managing partner of Hagens Berman and lead attorney for the e-books litigation and class action against Apple, said that a damages award reduction to $50 million would be a negative for consumers. However, Berman also said he thought it was an “unlikely scenario,” reports Reuters. As noted in a press release from Hagens Berman, even if the case is remanded to the District Court and the payout to consumers is reduced to $50 million, the Department of Justice and states’ attorneys general could still pursue their claims of injunctive relief against Apple.

According to Reuters, Berman said the parties involved in the case would take Cote’s concerns under consideration. A damages trial scheduled for August 25 will proceed if a settlement cannot be agreed on by all parties. Apple could be liable for up to $674 million in damages if the plaintiffs are successful in a damages trial.

Last summer, Cote ruled that Apple violated antitrust laws by colluding with five publishers to manipulate e-book prices in an attempt to squash competition from Amazon (NASDAQ:AMZN), which was selling e-books at a standard price of $9.99. Apple helped raised the average retail price of e-books by coordinating the use of agency model contracts with various publishers. The five publishers are Simon & Schuster, Hachette Book Group, HarperCollins, Penguin Group, and Macmillan. As noted by Hagens Berman, the five publishers have already agreed to pay $166 million to settle damages claims from consumers.

While Apple may prefer to win its appeal for the sake of its image, any payout it makes to settle e-books damages claims is unlikely to have much of an impact on the iPhone maker’s bottom line. Apple had a cash hoard of $164.5 billion at the end of the June quarter after posting a quarterly net profit of $7.7 billion.

More from Tech Cheat Sheet:

Follow Nathanael on Twitter @ArnoldEtan_WSCS