In response to its recent settlement for the price-fixing lawsuit with three major publishers, Amazon.com, Inc. (NASDAQ:AMZN) and Apple Inc. (NASDAQ:AAPL) have told some e-book buyers they will get credits toward future purchases of books.
The customers received emails by the two companies over the past weekend, and those considered eligible for a refund purchased “qualifying-ebooks” between April 1, 2010 and May 21, 2012, reported CNN. Customers who have determined they fall into this category, don’t need to take any action to receive a credit that will fall in an estimated range of 30 cents to $1.32 per book for Amazon; Apple did not not include a range in their correspondence.
Amazon.com, Inc. (NASDAQ:AMZN) was happy with their action and wrote in its email that the “settlements are a big win for customers and [we] look forward to lowering prices on more Kindle books in the future.”
Included in this past weekend’s emails sent to Amazon.com, Inc. (NASDAQ:AMZN) and Apple Inc. (NASDAQ:AAPL) customers, was the explanation of the case’s credit and settlement which is currently awaiting court approval after a February hearing. The emails further explained the settlement stems from the government and the publishers.
The court needs to approve this move and if it does so, the credits can be used for future e-book purchases and for Amazon customers, it can be used toward print books.
The latest action stems from the April case brought by the Department of Justice against Apple and five major publishers. The suit alleged that the group conspired together to increase the price of e-books. Earlier in the year, three of the publishers including Hachette Book Group, Simon & Schuster (NYSE:CBS) and HarperCollins (NASDAQ:NWSA) settled.
While Amazon had not been named as part of the lawsuit, Apple Inc. (NASDAQ:AAPL) said in September it will probably appeal the settlement’s approval, reported CNN. Apple and the publishers including Macmillan and Penguin (NYSE:PSO) who decided not to settle, will have their case go on trial in June 2013.
So how did the case come about in the first place?
Remember back in the day before the iPad’s 201o launch? Amazon’s Kindle was the market’s leading e-book reader. The company required publishers to sell the majority of books at $9.99 but according to the DOJ’s lawsuit, booksellers were unhappy with Amazon’s discounted e-book price structure first introduced in 2007.
So at the end of 2009, the publishers contacted Apple to determine a way to make Amazon increase its prices. The timing was right as Apple was about to launch its iPad. Allegedly, many books had been placed at “agency pricing,” which gave them $12.99 market prices, enabling Apple to receive a 30% cut.
Amazon followed suit by allowing publishers just three days later to make their own prices; in other words, this meant increased prices for their Kindle e-books.
The DOJ believed that from the deal, e-book customers subsequently paid a higher price of $2 to $3 for every book or in total, $100 million greater than they would have spent without this inflated price.
From the settlement, the three publishers had to give up a lot. They will have to allow retailers such as Amazon and Barnes & Noble (BKS) the opportunity to cut prices and for two years, they cannot ink contracts with retailers that have restrictive pricing policies.
In addition, for five years, the publishers cannot open contracts with retailers that have “most favored nation” clauses that restrict publishers from selling at lower prices to retailers.
And on a final point, the publishers have to cease their agency pricing agreements with Apple Inc. (NASDAQ:AAPL) and other retailers that includes deals with pricing restrictions, according to CNN.
On Monday, Amazon.com, Inc. (NASDAQ:AMZN) closed up 0.75% to $244.18 and Apple Inc. (NASDAQ:AAPL) rose 0.80% to $634.76.
