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Apple Found Guilty of E-Book Price Fixing

• By Leila Meyer
• 07/10/13

A federal judge at the Southern District of New York court has found Apple guilty of violating United States antitrust laws and colluding with five book publishing companies to inflate e-book prices. The three-week trial concluded June 20, and the judge issued the ruling July 9. The tech giant plans to appeal.

In a civil antitrust lawsuit, the U.S. Department of Justice claimed that in January 2010 Apple and five publishers entered an agency-model agreement, in which publishers, not retailers, set the price of e-books. The publishers agreed to set higher prices for bestsellers and new releases, resulting in a price increase from $9.99 to $12.99 and $14.99. As part of the agreement, which preceded Apple's entry into the e-book market with the launch of the iPad in April 2010, Apple received a 30 percent commission on each e-book sold and required publishers to match competitors' prices if they were lower. Because market-dominating Amazon sold e-books for $9.99, publishers began withholding some bestsellers from Amazon for a period of time after the release date.

“Understanding that no one Publisher could risk acting alone in an attempt to take pricing power away from Amazon, Apple created a mechanism and environment that enabled them to act together in a matter of weeks to eliminate all retail price competition for their e-books,” wrote U.S. District Judge Denise Cote, in a 160-page ruling. "The evidence is overwhelming that Apple knew of the unlawful aims of the conspiracy and joined that conspiracy with the specific intent to help it succeed."

The Justice Department initially sued Apple and five of the country's largest publishing companies: Hachette, HarperCollins, Macmillan, Penguin, and Simon & Schuster. Only Apple proceeded to trial, while the publishers settled with the Department of Justice and agreed to pay more than $166 million combined.

The Department of Justice may now seek injunctive relief, which could prevent Apple from using the agency business model to sell e-books for a two-year period and impose other requirements to prevent the company from skewing the e-book market in its favor.

Because Apple was found guilty of violating U.S. antitrust laws, 33 state attorneys general will now take the company to trial to recover money on behalf of consumers who paid higher prices for e-books.

Apple settled a separate e-book pricing antitrust case with the European Commission last year but didn't admit to any wrongdoing.