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Retail Price Maintenance

Dear Author

Monday News: Macmillan settles price fixing suit; Eink revenues are up;...

Now Sargent says that he’s come to understand the financial risks of proceeding with the lawsuit outpace the entire equity of the publishing house. What’s a bit ironic is that his statement gives testament to the collusive underpinnings of his actions:

First, the settlement called for a level of e-book discounting we believed would be harmful to the industry. We felt that if only three of the big six publishers were required to discount and we stood firm, those problems might be avoided. But when Random House agreed to be bound by the Penguin settlement, it became clear that all five of the other big six publishers would be allowing the whole agent’s commission to be used as discount, and Macmillan’s stand-alone selling at full agency price would have no impact on the overall marketplace.

In other words, one publisher standing alone can’t make a difference. All the publishers standing firm against discounting could. The terms of the settlement are essentially the same and encompass the State AG suits and the DOJ lawsuits.

The only difference for Macmillan is that there will be no delay in the execution of the settlement terms. Only Apple remains and it makes little sense for Apple to continue. All of the contracts have to be severed and renegotiated. The settling defendants cannot impose the pre existing contract terms on Apple and per the settlement agreements cannot have MFN clauses in their contracts. What would Apple win if they proceeded? At this point, basically a moral victory.

What happens now? This means that discounting for all the publishers can occur without the publishers’ prior consent. In two years, the publishers can seek to renegotiate contracts with agency pricing, but as John Sargent stated the affect on the marketplace if only one publisher insists on Agency is likely to be detrimental to the publisher rather than “improving” the marketplace for print and retail books. I feel like our long national nightmare started in 2010 is finally over.

I really appreciated how this article highlighted the loneliness Shelley Belgard felt as a young adult with hydrocephalus which inhibited some of her independent functioning. But Shelley met Bill, dated him, lived with him, and finally married him. Their problems are pretty much like any other couple’s problems. Bill, for example, was used to living with guys and when he started living with Shelley, it was a big adjustment.

“Getting used to living with Shel was a big trial for me,” says Bill, who is broad-shouldered and friendly, quick to offer a wide grin and a bear hug. His speech is sometimes slowed by a stutter but is almost unfailingly thoughtful and poignant. “That was just me trying to get from one part of my life to another. It was a big transition for me, because I was living with guys. Guys watch sports. Guys watch TV. What guys do is what guys do. They watch TV in their underwear. Now I know to keep my pants on.”

Philip Davidson, a professor of pediatrics at the University of Rochester School of Medicine and Dentistry said “These people are really not all that different than you and me. Their investment in the lives of other people are as significant as yours and mine.”

Monday Morning News: Timeline of the pricefixing lawsuit, Digital readers being spied on, and

Monday Morning News: Timeline of the pricefixing lawsuit, Digital readers being...

I’m changing things up a little.  More and more people apparently read the news roundup that I post every day and therefore I’ve decided to post the news posts first thing in the morning.  That’s when most people read the news and thus Dear Author can be a consistent morning routine for individuals who come for the news but not the reviews.

The reviews will be posted at 8 am and 12 pm CST followed by the deals posting in the afternoon around 2 or so.  I’m still fiddling with the time.

In any event, start your day with Dear Author for a timely and interesting set of curated news links.

First up today is a review of the price fixing lawsuit.  The court has entered a trial schedule for the combined cases and denied Penguin’s request to move the cases to arbitration.  There are some interesting and important deadlines.

  • July 6, 2012 – New initial report must be filed reflecting the scheduling order.  A deadline for initial disclosures will be set. It was for July 2 but I’m not sure if that date will hold up.  The initial disclosures are mandated by Rule 26 of the Federal Rules of Civil Procedure. They were enacted to require parties to not procrastinate and move cases faster through the system.  The initial disclosures will be the only interesting thing to read until next year when summary judgment motions are filed. Each parties’ initial disclosures must include the following:
    • Witnesses:  the name and, if known, the address and telephone number of each individual likely to have discoverable information—along with the subjects of that information—that the disclosing party may use to support its claims or defenses, unless the use would be solely for impeachment;
    • Exhibits:  a copy—or a description by category and location—of all documents, electronically stored information, and tangible things that the disclosing party has in its possession, custody, or control and may use to support its claims or defenses, unless the use would be solely for impeachment;
    • Damages:  a computation of each category of damages claimed by the disclosing party—who must also make available for inspection and copying as under Rule 34 the documents or other evidentiary material, unless privileged or protected from disclosure, on which each computation is based, including materials bearing on the nature and extent of injuries suffered
  • July 9, 2012 – the State AGs and Class Action Plaintiffs file their initial disclosures because they do not have to file anything that duplicates the DOJ’s list of disclosures.
  • July 11, 2012 – the settling defendants have to renew their request for a stay of the proceedings.
  • July 27, 2012 – DOJ to file for entry of the proposed Judgment.
  • August 8, 2012 – Responses to the DOJ’s motion for entry of proposed judgment. Cannot exceed 5 pages. Expect the parties to wax ad naseum about Amazon although the settling defendants will likely put forward supportive statements.
  • August 15, 2012 – Response by the DOJ
  • I would expect some type of ruling to occur by September.  Then the settlement terms kick in:
    • Within 7 days, the Settling Defendants (Hachette, HarperCollins, and Simon & Schuster) will need to sever their contracts with Apple.
    • Within 30 days, contracts that restrict an ebook retailers ability to set the price of an ebook or a most favored nation clause must be broken. Amazon would be a retailer with whom publishers have an MFN clause.  This is the time that discounting will begin.
  • September 13, 2012 – Motions for summary judgment.  This will be good reading. 
  • October 4, 2012 – Responses due.
  • Nov 16, 2012 – motion to certify class must be filed.
  • April 26, 2013- Pretrial order
  • April 16, 2012 – Motions in limine (this is a motion parties file to keep evidence out)
  • May 24, 2013 – Final Pretrial
  • June 3, 2013 – Trial begins (also when BEA 2013 begins)

I think there were some errors in the docket entry and hopefully the status report filed on the 6th will clear those up.

Penguin had filed a motion to stay (halt) any proceedings against them in civil court arguing that the arbitration clauses in the nook and Kindle agreements applied to Penguin as well because Amazon and BN were agents of Penguin.  The arbitration clauses of the nook and Kindle expressly forbid class actions and direct claims to arbitration.

The court denied the motion based on two provisions.  One, an individual can’t waive right to pursue antitrust claims in civil court.  Two, the class action plaintiffs showed the court that they would not be able to “effectively vindicat[e] their federal statutory rights” in arbitration. The plaintiffs satisfied the court that individual arbitration cases would be prohibitive for one consumer to bring.

In this case, the plaintiffs have presented … detailed affidavits demonstrating that, given the complexities of proving this particular antitrust violation, plaintiffs can expect at most a median recovery of $540 in treble damages, and face several hundred thousand dollars to millions of dollars in expert expenses alone. Plaintiffs have also demonstrated that they are likely to incur significant expenses in securing, organizing, and maintaining documents, deposing witnesses, and
in attorneys’ fees, and that they face no guarantee of recovering any or all of these expenses. Plaintiffs have already expended $45,000 in expert expenses evaluating the claims and drafting the complaint. Plaintiffs’ affidavits demonstrate that it would be economically irrational for any
plaintiff to pursue his or her claims through an individual arbitration. Penguin has presented no serious argument to the contrary.

The court did leave open the door to consider whether the plaintiffs’ state law claims could be heard in arbitration but stated that Penguin was unlikely to prevail. Each state has their own individual antitrust laws. If you recall, retail price maintenance, for example, was found to be illegal in the state of Kansas according Kansas’ state antitrust laws.

One other point of interest, the State AGs sent a letter to Judge Cote agreeing that the States agree to a bench trial on liability and injunctive relief but want a jury trial on the damages.  I thought it was interesting that the letter references injunctive relief as I think that if the settlement isn’t approved, there will be a filing for injunctive relief shortly thereafter.