Apple agrees to settlement in shareholder derivative complaint over e-book antitrust case ...

Posted:
in General Discussion edited May 2018
More than two years after Apple was forced to pay out $450 million to resolve an e-books antitrust case, the company is looking to close the book on the long-running debacle, and on Monday informed shareholders that it has agreed to stipulations for settlement of a lingering derivative complaint.

iBooks Antitrust


Filed with the Securities and Exchange Commission, Apple's notice to shareholders was lodged in compliance with an order from the Superior Court of the State of California for Santa Clara County, which late last month granted preliminary approval of a settlement in the derivative litigation.

In its current form, the settlement has Apple in agreement with a number of antitrust resolutions designed to prevent another iBooks row from occurring in the future.

Considerations include a more involved audit and finance committee, enhanced synergy between the antitrust compliance officer and other corporate bodies, antitrust compliance training, yearly reviews and more. In addition, Apple has agreed to modify its proxy statement to indicate that "antitrust compliance experience" will be a factor in considering candidates when a new director position opens.

Apple also agrees to adopt an antitrust compliance program similar to measures instituted after it lost the iBooks antitrust case, including the installation of an executive in charge of antitrust compliance. The company was notoriously at odds with an external antitrust monitor assigned to keep tabs on corporate proceedings a result of the Department of Justice action.

Under settlement terms, Apple will pay $2,750,000 to cover plaintiffs' legal fees. Counsel expects to pay each named plaintiff up to $5,000 each for their contributions to the case.

Both the modified corporate practices and antitrust compliance program shall remain in effect until the end of 2022. Per pending approval by the court, the settlement will release individual defendants of all asserted claims.

Apple shareholders can file a written objection to the settlement on or before July 6, 2018, or appear in court to participate in a fairness hearing scheduled for July 20.

Where it all began

Shortly after the iBookstore launched in 2010, Apple faced criticism over its handling of e-book pricing, specifically the company's insistence on committing to an agency model over wholesale pricing.

Under Apple's agency model, publishers were free to set their own pricing, but were restricted from selling products at cheaper prices on competing platforms. Conversely, the wholesale pricing model in use by Amazon allowed retailers to buy content from publishers in bulk and set resale prices at or below cost. In some cases, the wholesale strategy resulted in highly discounted e-book pricing for new books which would otherwise sell for much more

It was Apple's use of the agency model, with its most favored nations clause, that drew a class-action suit, EU regulator scrutiny and ultimately an antitrust suit leveled by the U.S. government.

Following a contentious trial that included testimony from Cook and correspondence from late Apple co-founder Steve Jobs, U.S. District Judge Denise Cote in 2013 found Apple to have conspired with publishers to artificially inflate e-book prices. Apple's collusion was estimated to have raised the going rate of e-books by several dollars across the industry.

After exhausting its appeal path, including a failed attempt to take the case to the Supreme Court, Apple in 2016 agreed to pay $450 million per terms of a settlement reached in 2014.

One month after the 2014 settlement was handed in, Apple was hit with its first shareholder derivative complaint. The complaints named company executives, including CEO Tim Cook and SVP of Internet Software and Services Eddy Cue, they believed responsible for the iBooks price fixing fiasco.

Plaintiffs in some cases sought damages and other remedies for alleged breach of fiduciary duty, waste of corporate assets and unjust enrichment. In one case, a plaintiff argued it was because of the defendants' misdeeds that walked Apple into a conspiracy with major book publishers to raise the price of e-books sold on the iBookstore.

Discovery efforts began in April 2016, when plaintiffs were granted access to documents, testimonials, emails, transcripts and other material from the antitrust action. Apple set up its own Special Litigation Committee consisting of board members James Bell and Susan Wagner that same month, and hired an outside law firm to handle its own investigation into the matter.

Settlement negotiations began in November 2016 and resulted in an agreement-in-principle for the resolution of the complaint in March 2017. The parties entered multiple extensions to then-current deadlines as they hammered out details of to-be-finalized stipulations prior to a court hearing on April 27, 2018.

Update: Apple filed a correction to its SEC notice on Tuesday with a new objection filing date. This article has been updated with the correct date.


Comments

  • Reply 1 of 14
    Rayz2016Rayz2016 Posts: 4,556member
    Ah yes. The case where the judge indicated that Apple would lose even before the trial started, and then installed a personal friend as the monitor when they did lose. 

    At least now Cook has learned the value of lobbying. Pity it was a little bit late. 

    The money is loose change, but the overwatch may hamper the company going forward. 


    chasmberndogradarthekatjony0lolliver
  • Reply 2 of 14
    wonkothesanewonkothesane Posts: 1,344member
    Rayz2016 said:
    Ah yes. The case where the judge indicated that Apple would lose even before the trial started, and then installed a personal friend as the monitor when they did lose. 

    At least now Cook has learned the value of lobbying. Pity it was a little bit late. 

    The money is loose change, but the overwatch may hamper the company going forward. 


    Funny, these are exactly the the two things from the case that came to my mind when reading this article. 
    radarthekat
  • Reply 3 of 14
    Rayz2016 said:
    Ah yes. The case where the judge indicated that Apple would lose even before the trial started, and then installed a personal friend as the monitor when they did lose. 

    At least now Cook has learned the value of lobbying. Pity it was a little bit late. 

    The money is loose change, but the overwatch may hamper the company going forward. 


    That and now eBooks are higher priced because Amazon has a near monopoly and yet the publishers and more specifically the authors are worse off than before.

    Good one America.
    chasmberndogradarthekatpropodHabi_tweetjony0lolliver
  • Reply 4 of 14
    chasmchasm Posts: 1,272member
    I have nothing to add to the commenters above. While I am confident Apple did play fast and loose with some of the rules, the judge in the case was blind to Amazon's monopolistic and predatory-pricing and the need to prevent the situation authors now find themselves in. Apple was acting in a manner that would benefit publishers, authors, consumers, and competitors by ensuring a level playing field. The DOJ was IMO bought off by Amazon lobbying and turned a blind eye. Consumers were "winning" when the case was going on because Amazon was selling e-books at a loss, but guess what -- the day of reckoning is now here. Consumers pay more, authors and publishers get less, and Apple is now legally barred from doing anything about it (but at least they are the only company rich enough to provide some competition for Amazon.

    A lot of people love Amazon (mostly for their other services) and that's not without cause, but when it comes to books -- I buy e-books exclusively from the iBookStore, and I buy printed books from indie publishers. Amazon will probably still destroy the book world as we know it (and not even care), but I will not help them do it.
    radarthekatosmartormenajrteejay2012randominternetpersonjony0lolliver
  • Reply 5 of 14
    radarthekatradarthekat Posts: 3,004moderator

    The many arguments Apple put forth in its appeal showed prejudice on the part of the court, several major departures from established precedent on application of the Sherman Act, legally disallowable application of inference, barring of defense expert witness, allowing the Justice department to withdraw testimony from at least one of Apple's expert witnesses when they didn't like the answer given to the Justice department's own questioning, then allowing testimony from the government's own witness when asked substantially the same question, etc.

    The details were too extensive to impart here, but here is one example of the court's behavior: Anti-trust law does not allow a judgement of conspiracy where the actions, negotiations, and ultimate agreements between the accused parties is consistent with those same actions, negotiations, and agreements being carried out without resorting to conspiracy. The court must view these as non-conspiratorial unless there is direct evidence of a conspiracy. The supreme court's example of what would constitute direct evidence is that of a CEO confessing that the chairman of the board directed him to meet with a competing CEO in order to fix prices. But the judge in this case offered nothing other than circumstantial evidence of a conspiracy based upon her confidence one existed. What she presented, in a single paragraph of her ruling, would not meet any precedent and directly conflicts with many previous rulings. 

    Good this is finally fading from history.


    uraharaairnerdjony0
  • Reply 6 of 14
    Rayz2016Rayz2016 Posts: 4,556member
    chasm said:
    I have nothing to add to the commenters above. While I am confident Apple did play fast and loose with some of the rules, the judge in the case was blind to Amazon's monopolistic and predatory-pricing and the need to prevent the situation authors now find themselves in. Apple was acting in a manner that would benefit publishers, authors, consumers, and competitors by ensuring a level playing field. The DOJ was IMO bought off by Amazon lobbying and turned a blind eye. Consumers were "winning" when the case was going on because Amazon was selling e-books at a loss, but guess what -- the day of reckoning is now here. Consumers pay more, authors and publishers get less, and Apple is now legally barred from doing anything about it (but at least they are the only company rich enough to provide some competition for Amazon.

    A lot of people love Amazon (mostly for their other services) and that's not without cause, but when it comes to books -- I buy e-books exclusively from the iBookStore, and I buy printed books from indie publishers. Amazon will probably still destroy the book world as we know it (and not even care), but I will not help them do it.
    Well said. 

    And and I also find it odd that Amazon is perfectly happy to cripple Services they’ve bought out so they don’t have to pay 30% of the service price to Apple, but takes up to 70% of the book cover price from an author. 
    osmartormenajrjony0
  • Reply 7 of 14
    YvLyYvLy Posts: 75member
    "Good this is finally fading from history." No, unfortunately, it is not. It is just adding to my notion that governments and politics are too dumb to run a company ... ehh .. country.
    urahara
  • Reply 8 of 14
    Rayz2016Rayz2016 Posts: 4,556member

    Good this is finally fading from history.


    Is it?

    With more lawyers being employed on Apple’s dime to make sure that the company doesn’t interfere with Amazon’s business plans for the publishing market?

    It does explain why iBooks hasn’t enjoyed any real attention from Apple. 
    edited May 2018 uraharaHabi_tweetlowededwookierandominternetpersonjony0
  • Reply 9 of 14
    cjcampbellcjcampbell Posts: 108member
    Now we can get to the shareholder derivative case where the shareholders sue Apple because they were not properly notified of the shareholder derivative case.
    urahararandominternetperson
  • Reply 10 of 14
    Rayz2016 said:

    Good this is finally fading from history.


    Is it?

    With more lawyers being employed on Apple’s dime to make sure that the company doesn’t interfere with Amazon’s business plans for the publishing market?

    It does explain why iBooks hasn’t enjoyed any real attention from Apple. 
    I was looking for a book called SketchUp for Dummies and on the NZ store it was something like $40 meanwhile on Amazon it was like $20 something US (which is about $40 NZ now that I think about it) but I was like... like hell Amazon is getting my money because I'll have to use their crap app but I want to use iBooks and so frankly I turned to the lesser of two evils and found a good tutorial on YouTube.

    I'll probably still pay the higher price on iBooks though simply because I want to support Apple rather than these tits.
    jony0
  • Reply 11 of 14
    badmonkbadmonk Posts: 772member
    Though I know Apple “colluded” with publishers to set appropriate prices for eBooks, isn’t Amazon’s business structure more anti-competitive?  Constructing businesses to expand without profit to avoid paying taxes and taking out competitors seems more of a problem to competition in the long-run.

    I feel Amazon exists because Jeff Bezos “reverse-engineered” how Wall Street values companies and has set up this competition consuming monster.

    Amazon needs to be broken up before it’s destroyed huge swaths of competition in the marketplace.

    Marx may have been right about Captislism in the end.
  • Reply 12 of 14
    rotateleftbyterotateleftbyte Posts: 1,044member
    Rayz2016 said:
    Ah yes. The case where the judge indicated that Apple would lose even before the trial started, and then installed a personal friend as the monitor when they did lose. 

    At least now Cook has learned the value of lobbying. Pity it was a little bit late. 

    The money is loose change, but the overwatch may hamper the company going forward. 


    That and now eBooks are higher priced because Amazon has a near monopoly and yet the publishers and more specifically the authors are worse off than before.

    Good one America.
    Why aren't these 'activists' going after Amazon? Some of their policies towards e-books are very restrictive. Those policies are the reason why my three (soon to be four) novels are not going anywhere near the Bezos Monopoly.
  • Reply 13 of 14
    rotateleftbyterotateleftbyte Posts: 1,044member
    badmonk said:
    Amazon needs to be broken up before it’s destroyed huge swaths of competition in the marketplace.
    Too late for that. They have taken the WalMart model and developed it into their forever hungry empire. I think that they won't stop even when all other retailers both large and small have either gone to the wall or hauled up the white flag and let Amazon take their cut of their business. Sort of like the old 'protection funds' that the Mafia used to operate.
    I've basically stopped using Amazon unless there really is no alternative. This approach is getting harder each and every day.
    randominternetperson
  • Reply 14 of 14
    nunzynunzy Posts: 662member
    Amazon is a Monopoly. Shut them down.

    But no,  instead they pick on Apple. Typical.





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