Case lzll-md-02293-DLC Document 559-4 Filed 02/24/14 Page 2 of 2

CONFIDENTIAL CONTAINS MATERIALS DESIGNATED AS HIGHLY
CONFIDENTIAL PER PROTECTIVE ORDER

Expert Report of Jonathan B. Baker
Texas et al. v. Penguin Group (USA) Inc. et al., No. 

February 8, 2013

Assignment and Summary of Conclusions

Thirty?three states and territories have charged that ?ve book publishers (Hachette.
I-IarperCollins, Macmillan, Penguin, and Simon Schuster, collectively termed the
?defendant publishers?) and Apple conspired to raise the retail prices of electronic books
(ebooks), in violation of the federal antitrust laws and a number of state statutes
prohibiting unfair competition] Retail prices for ebooks increased pursuant to the
challenged agreement starting in April 2010, according to the states? complaint. Three
publishers have reached settlements with the states.

2. I was asked to analyze the economic plausibility of coordinated conduct among the
defendant publishers and Apple consistent with the states? claims. I was also asked to
provide an economic analysis of the harm to consumers arising from that conduct.

3. A summary of my conclusions is set forth below:

a. The defendant publishers likely acted in a coordinated way to obtain the ability to
set retail prices of trade ebooks sold in the United States (US) at retail outlets,
particularly Amazon?s, thereby facilitating retail ebook price increases.

b. The defendant publishers also likely coordinated in setting retail ebook prices
once they obtained the authority to do so, and selected retail prices for trade
ebooks sold in the US. above the levels that would likely otherwise have
prevailed.

c. Coordinated conduct likely was facilitated by the ebook distribution agreements
that the defendant publishers entered into with Apple in connection with the
launch of Apple?s iBookstore.

d. Consumers were harmed by the increase in retail prices, averaging approximately
19% for the books sold by defendant publishers, that likely resulted from
coordinated conduct.

 

Second Amended Complaint for lnjunctive Relief, Civil Penalties as Parens Patriae on behalf of Consumers.
May 17, 2012 (Case Iflz-cv-03394-DLC).