E-Book Retailers Strike Out on Apple Antitrust Suits

MANHATTAN (CN) — Four years after Apple’s heavy antitrust penalty, the Second Circuit added a footnote from the digital literary saga, dismissing lawsuits from two defunct e-book retailers that blamed the tech giant’s price-fixing conspiracy for their decline.

On Monday, the New York-based Second Circuit affirmed the dismissal of lawsuits by BooksOnBoard and Diesel eBooks, which went belly up in the wake of a major shake-up in the publishing industry.

During its height, the e-book industry largely operated on a wholesale business model, in which publishers would sell e-books to retailers and suggest a non-mandatory price.

Then, the industry switched to an agency-pricing model.

“Under the new agency pricing model the publisher required the retailer to sell the e-book at a retail price of the publisher’s choosing, and the publisher paid the retailer a commission for each sale,” the Second Circuit explained on Monday.

In separate lawsuits, BooksOnBoard — through its corporate entity Abbey House Media — and Diesel eBooks alleged that Apple’s collusion with five major publishers sparked the change that sank their business.

That Apple conspired with publishers Simon & Schuster, Macmillan, Penguin, Hachette and HarperCollins is no longer in dispute.

Facing liabilities from the federal government and 33 states, the publishers entered into a $166 million antitrust settlement half a decade ago, and a federal judge found Apple guilty of violating the Sherman Act following a three-week trial in 2013.

“Through their conspiracy they forced Amazon (and other resellers) to relinquish retail pricing authority and then they raised retail e-book prices,” U.S. District Judge Denise Cote wrote in a 159-page opinion at the time. “Those higher prices were not the result of regular market forces but of a scheme in which Apple was a full participant.”

Cote found that Apple helped the publishers raise e-book prices to ensure that it would make a profit on the iBookstore when it launched the iPad in 2010.

But Cote also found last year that BooksOnBoard and Diesel eBooks could not pin their decline on that conduct.

In per-curiam opinions, three judges from the New York-based Second Circuit affirmed that finding in a pair of rulings on Monday.

“Based on the undisputed facts in the record, the district court determined that BooksOnBoard faced strong competition from large retailers, that it contemporaneously viewed the adoption of agency pricing as a boon, and that its subsequent demise was not attributable to the unlawful conspiracy,” one of the opinions states. “We have carefully reviewed the summary judgment record, and we agree with the district court’s determination that the record permits no genuine dispute as to any material fact underlying the conclusion that, as a matter of law, the appellant suffered no antitrust injury caused by the unlawful antitrust conspiracy.”

Both rulings have similar language, and span only four pages.

U.S. Circuit Judges Amalya Kearse, Peter Hall and Denny Chin co-wrote each of them.

BooksOnBoard’s parent company Abbey House declined to comment on the decision. Attorneys for Diesel eBooks did not immediately respond Monday to an email request for comment.

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