An unsettling settlement

An unsettling settlement

recently wrote about Judge Cote approving a settlement agreement between 49 states, four additional American entities, and three publishers over the Agency Model pricing structure.

 The basic idea in this civil action is that the three settling publishers (HarperCollins, Hachette, Simon & Schuster) damaged consumers by colluding (along with two other publishers and Apple…those have not settled yet) to raise e-book prices.

As I understand it, that’s how a civil suit works: someone is damaged, and someone else is found to be at fault and forced to “make right the wrong”.

That’s different from a criminal case. The criminal has broken a law, and is going to be punished…there isn’t necessarily a specific individual or other entity that has been damaged a certain amount. When you are speeding, you aren’t damaging another person. If you run over somebody’s petunias, they’ve suffered a specific loss. Speeding is criminal…running over the petunias would be civil.

So, the basic result of this suit is that consumers will get recompensed for the higher prices they paid…I’d be surprised if anybody got as much as $20, although it’s certainly possible.

That’s the way it works.

I want to thank regular reader and commenter Lady Galaxy for crystallizing my thoughts on this with a generous and wise comment.

In a comment on the above post about the settlement, Lady Galaxy said that essentially that getting the cash wouldn’t be the best result…buying the books at that price had been a choice. If that cash does come, Lady Galaxy would donate it to a library (you can read more of the details in the comment).

I thought that was very insightful.

Let’s say that someone bought a book for $12.99 that “should have been” $9.99.

Is that the person who was most damaged by the Agency Model?

I would guess that many (perhaps the majority) didn’t even know there was an Agency Model, didn’t even realize that prices were higher than they had been.

They were willing to pay $12.99 for the book…I respect that consumers can make an intelligent decision on that.

What about the people who decided that they couldn’t afford the book at $12.99? Weren’t they injured more?

Is getting a check for $3 (which may have cost more than that to process and send) going to make you feel satisfied?

I know…that’s the system. The directly injured person is recompensed, the indirectly injured person gets nothing.

The settlement is for $69 million dollars.

Just fantasizing, wouldn’t it be nice if that money could go to help people get books who couldn’t afford them?

Civil suits don’t punish, and aren’t really about the future, but if they were…

Let’s say they take that $69 million and donate it to Project Gutenberg to help digitize public domain books?

Honestly, I’d be a lot happier with that.

That wouldn’t really hurt the publishers…the public already owns those books. One could argue that having more public domain freebies available would hurt sales of current books, I suppose.

What if they were compelled to improve their deals (when they even have them) with public libraries?

None of that’s going to happen…I’m sure people will get checks.

Those same three publishers have settled with the Department of Justice in a separate action.

The two publishers (Penguin, Macmillan) and Apple, who haven’t? They may eventually be subject to criminal penalties…or, they could win, and owe nothing.

===

Two asides to people who have recently commented.

In a private comment, a reader urged me to write something for the KFHD (Kindle Fire HD). I am considering that. I’ve been working a lot, and I may have some “writing days” coming up as a result. There’s another book I want to finish before I do something else.

I think I wouldn’t do something as…formal as Love Your Kindle Fire. I may do something and introduce it at ninety-nine cents. There are lots of differences between the KFHD and the KF1 (Kindle Fire 1st Generation), and some of them are non-intuitive. For example, I got to listen to the new text-to-speech (TTS) today on a commute…I was impressed! It’s the Ivona software, and I think it is the Salli voice.

The surprising thing was that turning the KFHD from portrait (taller than it is wide) to landscape (wider than it was tall) stopped the TTS. That was disconcerting at first, but I can really see the value. If someone walks in when you are listening to something… embarrassing, perhaps, you can stop it quickly. :)

You can lock the rotation so it doesn’t turn off, if you want…swipe down from the top, and you can tap the “Unlocked” icon to make it “Locked”.

So, I appreciate your encouragement, reader, and I’ll certainly think about it.

As to the other comment…

That person wanted me to post it (or at least, didn’t say it was private).

I’m not going to do that.

It was really basically an ad…it linked to their own blog. I’ll sometimes allow that if I think it’s just an interesting article that would interest my readers.

However, the comment was partially this:

“Why not strip the drm, then you can read the ebooks anywhere any without limitaion.”

The answer for me is, because I believe it is likely to be illegal.

I don’t typically promote activity I believe to be illegal.

On top of that, the author made the deal with the publisher, and the DMCA (Digital Millennium Copyright Act) protected DRM (Digital Rights Management) was part of that understanding.

While the author might prefer that there be no DRM, and I believe it disrespects the author to strip that. The author might have gotten more money if the book was being released without DRM, since that might, hypothetically, reduce the sales…meaning that the publisher pays a higher royalty to make up for that.

So for me, that’s why.

Some major publishers are releasing books without DRM…that’s a different story.

Feel free to tell me and my readers what you think. Is giving money to consumers who paid a higher price due to the Agency Model the right action? If the non-settling publishers lose their case, what would you like their punishment to be? Are you fine with stripping DRM? Should I write something on the KFHD? If I do, how do I handle the multiple models in that line? You can comment on this post…if you’d like it to be private, please say so in the post.

Thanks again to Lady Galaxy!

This post by Bufo Calvin originally appeared in the I Love My Kindle blog.

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6 Responses to “An unsettling settlement”

  1. Joe Says:

    I wanted to sign up for the consumer lawsuit, but I didn’t because I didn’t buy any Agency Model books over (or at) $9.99.

    I hated the Agency Model and went out of my way not to support it, and didn’t read books that I wanted to on my Kindle.

    Personally, I would like to see them compelled to improve their deals with public libraries.

    • Bufo Calvin Says:

      Thanks for writing, Joe!

      The class action suits are yet another legal action about the Agency Model.

      I also had a visceral reaction to the Agency Model. It wasn’t about prices going up…$12.99 for a newly released book didn’t seem high to me. It was about three things, really:

      1. The lack of competitive pricing by retailers (as a former retailer, that really galled me)

      2. The way it was directed at Amazon, really…an entity that was getting people back into reading by taking a loss on some popular books. I saw Amazon as an innovative company bringing an important technological change into the mainstream that would make the world’s great literature free to many people who couldn’t get it otherwise, and create a new distribution model that let people earn a living writing who otherwise would have had virtually no chance. Yes, Amazon was doing it for its own gain, eventually, but it was having a positive societal impact

      3. It felt masterminded by Apple, which had made it clear that books and reading weren’t important, and selling hardware was the main goal

      I still think a possibility is that publishers will make e-books available for loan based on needs testing. They may need to look at their public image strongly, and that would be a way to do it. In the scenario I’ve suggested for permanent copyright

      http://ilmk.wordpress.com/2010/08/09/should-copyright-be-permanent/

      Fair Use for educational purposes would be greatly broadened.

      Tax incentives could be used to encourage publishers to support public library, but that’s a tough sell right now. Publishers have, in the past, donated literally tons of books…but not having unsold returns for e-books changes that dynamic.

  2. rogerknights Says:

    I Googled “class action awards to charity” and found a link to a Wikipedia article on the Cy-pres doctine, here: http://en.wikipedia.org/wiki/Cy-près_doctrine

    In 1986, the California Supreme Court endorsed cy-près mechanisms in class action settlements, and other American courts followed.[2] Cy-près mechanisms allow money to be used to promote the interests of class members, rather than reverting to a defendant, which could be seen as a windfall to a defendant charged with breaking the law. Judge Richard Posner has argued that the term is a misnomer in the class action context, because cy-près awards serve a punitive effect.[2] Some commentators have criticized the use of cy-près settlements; the American Law Institute’s Draft of the Principles of the Law of Aggregate Litigation proposes limiting cy-près to “circumstances in which direct distribution to individual class members is not economically feasible, or where funds remain after class members are given a full opportunity to make a claim.”

    However, Google also found me this one, at http://www.google.com/url?q=http://newsandinsight.thomsonreuters.com/Legal/News/2011/09_-_September/5th_Circ__says_class_action_money_must_go_to_class,_not_charity/&sa=U&ei=Pa9YUJH2HJCyigLgnIHIDg&ved=0CBYQFjAB&sig2=Dqd4cvYGzSJkivHUF0mELA&usg=AFQjCNGrSNwXl3tRLe9sI9ATJp03Ns55mA

    5th Circ. says class action money must go to class, not charity
    9/27/2011

    The legal doctrine of cy pres-from a French phrase meaning “as close as possible”-certainly has the best of intentions. Cy pres holds that when it’s not possible or not feasible to distribute funds to beneficiaries (of, for instance, a trust or inheritance), the court should do the next best thing and give the money away in a manner that’s in line with the donor’s wishes. In practice, as Georgetown law school professor Brian Wolfman explained in an appellate brief challenging a cy pres award, cy pres awards have become a controversial device in big-money class actions. When class members don’t step up to claim their share of settlements (sometimes because their share is so small or otherwise intangible that they don’t consider it worth the trouble), judges donate the unclaimed money to a charity of their choice.

    “These cases have raised suspicion when the entity awarded is a favorite of counsel or the court,” Wolfman’s brief said. “But even the most innocent-seeming choices are contributing to the emergence of a ‘cy pres industry’ in which charities lobby for awards from settlements with no regard for the purposes of the class action or potential benefits to class members.”

    For all the grumbling they’ve generated from class action reformists, cy pres awards are rarely challenged-mostly because there’s no one to challenge them.
    [Continues]

  3. Lady Galaxy Says:

    I’m glad my ramblings inspired a post. Thanks for the thanks.

    I’m wondering what will become of Random House. They weren’t part of the agency model when the suits were filed, but they eventually did join in, and it looks as if they’re continuing to price their books on the highest side of the Kindle price list. The Kindle Daily promoted a gluten free cookbook in it’s download today. When I checked it out, I discovered the Kindle edition was priced at $15.99, only 99 cents lower than the price of the hard cover. The publisher was Random House. Needless to say, I passed on the opportunity to purchase.

    Since they were not part of the original suits, will they be the rogue company still sticking with the agency model, or will they be required to comply with the final results? Are they waiting to see what happens to the ones who didn’t settle? Will their authors be the biggest losers because Kindle users aren’t willing to pay such high prices? Time will tell.

    • Bufo Calvin Says:

      Thanks for writing, Lady!

      Thanks for the thanks for the thanks. ;)

      Random House is an interesting case. The DoJ (Department of Justice) action really presented evidence for collusion. Since Random House didn’t join the Agency Model for almost a year, it’s unlikely that they colluded with the other Agency Model publishers…they won’t have been at those meetings that were documented.

      While the settlement included suspending the Agency Model, it’s not specifically the Agency Model that’s the problem.

      It’s possible that Random House continues the Agency Model…but lowers the price, to compete with the non-Agency prices for the other publishers.

      It’s all a bit too soon to tell, though…

  4. Personal Injury News 09/26/2012 - Says:

    [...] An unsettling settlement « I Love My Kindle That’s different from a criminal case. The criminal has broken a law, and is going to be punished…there isn’t necessarily a specific individual or other entity that has been damaged a certain amount. When you … Weren’t they injured more? Is getting a check for $3 (which may have cost more than that to process and send) going to make you feel satisfied? I know…that’s the system. The directly injured person is recompensed, the indirectly injured person gets nothing. http://ilmk.wordpress.com/ [...]

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