2020 hasn’t looked like any other year in recent memory, and 2021 doesn’t seem to be straying too far from its footsteps right now. But some recent news is remarkably similar to some from almost a decade ago. Will the outcome be the same? The Lawsuits Think back, if you can, to 2011. Oprah Winfrey […]
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2020 hasn’t looked like any other year in recent memory, and 2021 doesn’t seem to be straying too far from its footsteps right now. But some recent news is remarkably similar to some from almost a decade ago. Will the outcome be the same?
Think back, if you can, to 2011. Oprah Winfrey ends her namesake talk show. Captain America: The First Avenger hits theaters. Steve Jobs passes away. And in the Northern District of California, the Hagens Berman law firm files a class-action lawsuit against Apple and five of the biggest publishers for allegedly price fixing eBooks and wanted compensation for overpaying for eBooks (Petru et al v. Apple, Inc. et al).
The next year, the US government (and joined by several state attorney generals) sued those same defendants also on the basis of price fixing.
All the publishers would settle out-of-court, but Apple went to trial and lost. Although Apple reached an agreement with the government and the civil lawsuit, they continued to appeal all the way to the Supreme Court. The Supreme Court denied to hear the case. This meant that, between Apple and the publishers, consumers received about $550 million in refunds or credits.
Background of the Case
Around 2009, about 90% of all eBooks sold were through Amazon. And according to court documents, nearly half of all eBook sales were under labels from publishers Hachette, HarperCollins, Macmillan, Penguin, or Simon & Schuster, and “85 percent of the most popular fiction and non-fiction titles”. Random House, another major publisher who rounded out the group known as the Big Six publishing houses, was not a defendant in the case, but they would merge with Penguin Group a few years later and create the Big Five in 2013.
Executives from the Big Six were discontent with Amazon selling most of their recent and top hits for $9.99. As Apple prepared to launch the iPad in 2010, Apple invited publishers to release books on their new iBookstore since they knew the Big Six were trying to find ways to push back against the online giant. Through a set of meetings, Apple and the Big Six envisioned major releases being sold in the $12.99-$14.99 market range. Because that would be more than Amazon’s pricing, Apple encouraged the publishers to go to Amazon and renegotiate their agreements to demand the agency model, a fee structure Apple used with apps and had agreed to use with the Big Six on books.
In addition, Apple wanted to be prioritized (most-favored nation clauses, aka MFNs). So Apple could win the eBook war in one of two ways: either they would be able to sell eBooks at the lowest advertised price, or eBooks from these publishers wouldn’t be available on Amazon. All but Random House would sign these agreements with Apple to help kick off the iBookstore; Random House would do so later.
Amazon, of course, wasn’t happy, writing to the Federal Trade Commission (FTC) about how publishers who had signed with Apple were now pushing for the agency model after using the wholesale method for years.
This chart from the court case shows how eBook prices jumped on Amazon after they switched to the agency model. The Wave 1 corresponds to the launch of the iPad in the US on April 3rd, 2010.
Ultimately, courts would find Apple and the five publishers conspired to break antitrust laws by both eliminating competition and raising prices, as the Supreme Court declined to hear the case in March 2016.
After all that, while a lot has changed since the iPad’s (and iBook’s) debut, Amazon still is in control of the eBook market. According to Bloomberg, as of 2018, almost 90% of eBook sales were through Amazon. Retail Dive pegs the number closer to 80%, but other analyses suggests it’s lower at around 67%. Regardless, although there’s more competition out there now a decade later, Amazon still is leading the charge for digital books.
So, that may be a nice history lesson for the day, but why am I bringing all this up?
Well, on January 13th, The Wall Street Journal reported the state of Connecticut was probing Amazon’s eBook agreements with publishers. The next day, a lawsuit was filed against Amazon (Fremgen et al v. Amazon.com, Inc.). The suit alleges Amazon made deals with the Big Five in 2015 to increase eBook prices.
If that sounds familiar, that’s because it is. It’s a class action lawsuit seeking damages filed in the Southern District of New York led by Hagens Berman accusing Amazon of using MFNs with five major publishers to prevent eBook prices being lowered elsewhere.
Can you count how many similarities there are to the case against Apple?
The European Union investigated Amazon in 2015 for this very issue, and the company reached an agreement with the EU in 2017, including a ban on MFNs for five years. However, that only applied to the EU, not the US or anywhere else.
In a section aptly named “New Economy, Same-Old Price Fixing”, Hagens Berman claims that eBook prices were competitive around 2013-14, right after the Apple lawsuit and settlements, but prices rose again in 2015 due to Amazon. This civil lawsuit is just one of many current and recent investigations into the retailer here and in the EU, particularly in regards to third-party sellers and their data.
Of course, there’s no guarantee any probes or findings will result in compensation for consumers or changes in business practices. So even though the price fixing complaints from 2012 case is like the one Amazon is facing now, the outcome could be different.
Physical vs Digital Pricing
I’ve said before that one of the reasons I’m a physical fan is that I tend to get better deals, that prices often end up being the same or cheaper than their digital counterparts. Most new video games, for instance, show up on release date at Walmart for $10 off MSRP. Here’s Michelle Obama’s book, a former New York Times bestseller where it’s currently cheaper to buy a hardcover version of versus its Kindle counterpart. I’m sure in those type of cases, even those of you who prefer digital may not think it’s worth a premium.
But sticking to manga and light novels, yes, things have changed in the past couple of years. Barnes & Noble no longer has 50% off select titles on Mondays from Barnes & Noble, and more titles being printed in a larger trim size and retail for around $12.99-$14.99. But even though the average daily price gap may have increased slightly in favor of eBooks, I still prefer physical. And in some cases, it’s still minimal. Like in this case, it’s only $.34 cheaper to buy the Kindle edition versus physical version:
In another example, digital versions of most (all?) of Kodansha Comics’ $10.99 MSRP physical manga retail for the same amount — for example, Cardcaptor Sakura: Clear Card. So maybe not to the Becoming extreme, there are still cases where the money aspect is not a clear benefit to choosing a digital manga over a printed one.
And while that’s the situation now, it’s also possible things may be different in a year or so when the COVID-19 pandemic subsides. Also, this lawsuit is pointing to agreements Amazon made with the Big Five around 2015, and it would have been easier to find strange physical-digital price disparities for manga and light novels five or six years ago — you know, back when Right Stuf’s Got Anime? program was cheaper, Walmart offered free shipping on book preorders, etc.
Possible Money Back?
So could manga and light novel readers end up with some compensation? It’s possible. Last time, Apple had to refund almost $7 per New York Times bestseller and about $1.50 for other books from the major publishers. Hypothetically, a settlement could work like before and be a per-book charge, or I know some class action lawsuits have done a flat amount per customer, with amount to fluctuate depending on how many people file a claim.
The major manga/light novel publishers have connections with the Big Five, but they are not whole imprints of the Big Five, which was one of the factors in the settlement before. But while manga and light novels may not be affected, there are related releases that could fall into the affected category that fans may have purchased, like Pokémon novels and guides or game art books.
That’s jumping ahead, of course, but the number of investigations into Amazon, a general anti-big tech/monopoly sentiment sweeping the nation, and, of course, the similarities to Apple’s situation suggests to me it is more likely than not there will be some type of settlement, although maybe nothing of Apple’s magnitude. It’s fairly common to settle these sorts of cases to avoid a lengthy process.
But there’s at least one major different difference from before: this class action suit is right now is only against Amazon, not Amazon and the Big Five. The complaint calls the Big Five “Co-conspirators”, not Defendant(s). That could increase or decrease the size of the class in the class-action suit. And with only one — albeit large — company being sued, it may be harder to reach a settlement. It’s possible that the lawsuit could be amended so the Big Five are added if more evidence is uncovered, or if states and/or the US government files a federal complaint, maybe they’ll be sued as well. Who knows. The last lawsuit took from 2011 until 2016 to officially conclude with the government’s case, so this case could take several years as well. Plus there have been changes in regards to class action lawsuits as well.
If nothing else, the class action lawsuit may cause a ripple effect through the eBook market, which the lawsuit argues happened before. Because the lawsuit isn’t just about Amazon’s Kindle pricing; it’s about Amazon preventing anywhere else like Apple Books or Nook from offering a cheaper price. This chart submitted as evidence shows what the plaintiffs say was a wider range of prices for eBooks back then.
Not saying they’re right or wrong, but more variety is almost always a good thing. Manga and light novels may not have the flexibility in pricing versus Western fiction due to contracts, translations, and lettering, but if perhaps the Big Five are forced to be taken down a notch in their pricing structure, smaller publishers can better compete in the digital book space on Amazon and elsewhere.
Where do you buy your eBooks? What do you think about current pricing for digital releases? Did you get a settlement back from the Apple lawsuit?
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