Apple found guilty of e-book price hike conspiracy
A US District judge found Apple guilty of conspiring to raise e-book prices in violation of antitrust laws. In a Wednesday statement, Judge District Cote writes that Apple is liable for 鈥渇acilitating and encouraging鈥� price fixing with five major publishing companies, rejecting Apple鈥檚 argument that it never intended to conspire with publishers.聽
Apple was accused of raising the price of e-books to $12.99 and $14.99 in agreements with five publishing companies 鈥� Hachette, HarperCollins,聽Simon & Schuster, Macmillan, and Penguin 鈥� with the launch of the iBookstore in 2010.聽
At that time, Amazon.com held 90 percent of the e-book market, and sold books, which it purchased wholesale from publishers, at a flat-rate of $9.99 per book. Apple proposed paying publishers a more lucrative聽commission聽fee based on the number of books sold, and proposed setting up an agency model that allowed publishers to direct book prices. The publishers would agree to offer certain books exclusively through Apple at a higher price, a model which would undercut the appeal of Amazon.com's flat-rate pricing. 聽聽
鈥淎pple was an essential member of the charged conspiracy and was fully complicit in the scheme to raise e-book prices,鈥� even though the publishers were also culpable, writes Judge Cote.聽
Though they admitted no wrongdoing, the five publishing companies accused of colluding with Apple all settled and agreed to issue approximately $175 million in consumer credits to customers.聽
鈥淔rom the consumer鈥檚 perspective鈥he arrival of the iBookstore brought less price competition and higher prices,鈥� according to the US District Court 谤耻濒颈苍驳.听
Apple has denied that the company was involved in crafting a horizontal price-fixing scheme and plans to appeal the case.聽
鈥淲e gave customers more choice, injecting much needed innovation and competition into the market, breaking Amazon鈥檚 monopolistic grip on the publishing industry,鈥� according to a statement released by Apple after the US District Court鈥檚 decision came out. 聽
But it isn鈥檛 clear what exactly Apple can contest 鈥� the case was pretty straightforward, Harry First, a law professor at New York University, told the Monitor.聽
鈥淎pple beat itself at its own game;鈥� the case might have convinced Amazon that it can charge higher book prices, says Mr. First.
The real significance of the case is the precedent it sets: the decision acts as a warning against price collusion for other companies, First explains.
Should Apple lose its appeal, the state attorneys general will be allowed to sue Apple for financial compensation on behalf of consumers who have been overcharged as a result of Apple鈥檚 violation of the antitrust laws. This could expose Apple to significant damages.聽
Wednesday鈥檚 ruling is 鈥渓ike a Christmas gift for the publishing industry,鈥� Andrew Albanese, a senior writer at Publisher鈥檚 Weekly, told the Monitor. The publishers have already settled with the government and agreed to pay the consumers in credits, which can be spent only on books. If Apple loses its appeal, Mr. Albanese foresees the company reimbursing consumers with credits to be used for the purchase of books, which could translate into money back in the publishers鈥� pockets. According to the for the state attorneys general e-book settlements, for each聽e-book purchased from聽from April 1, 2010 through May 21, 2012,聽customers will be compensated $1.32 for New York Times bestsellers and $0.30 for non-bestsellers. 聽
Additionally, the agency model is still in place, allowing publishing companies greater control over pricing, Albanese says. 鈥淎mazon remains one of the main games in town,鈥� he says, but this trial shook up the e-book industry, and gave the publishers more clout in the price negotiation process.聽
