Judge finds Apple guilty of e-book price-fixing

Posted By Kristen Butler, UPI.com  |  July 10, 2013 at 11:11 AM
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A New York federal judge on Wednesday found Apple guilty of a price-fixing conspiracy for electronic books, saying the company "conspired to restrain trade" with publishers to boost the price of ebooks.

Judge Denise Cote said in her opinion that "Apple is liable here for facilitating and encouraging the Publisher Defendants’ collective, illegal restraint of trade." She ordered a new hearing to determine damages.

The Department of Justice brought the lawsuit in April 2012 and alleged that Apple had acted as the "hub" in a hub-and-spoke conspiracy with publishers to move the book industry from a wholesale model dominated by Amazon.com to an "agency" model where Apple and other e-retailers would take commissions. These actions resulted in e-books being sold above the $9.99 price point regularly used as an upper limit by Amazon.

"The plaintiffs have shown that the publisher defendants conspired with each other to eliminate retail price competition in order to raise e-book prices, and that Apple played a central role in facilitating and executing that conspiracy," wrote Judge Cote in a 160-page ruling. "Without Apple's orchestration of this conspiracy, it would not have succeeded as it did."

All of the publishers -- Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster -- agreed to settle the charges, but Apple continued to defend the pricing structure and took the case to trial.

Testimony from Apple executives revealed how Apple’s late co-founder, Steve Jobs and Eddy Cue, senior vice president of Internet software and services, cut deals with publishers that guaranteed Apple would get 30 percent of sales revenue.

But Cue denied they went into negotiations with the intent of raising prices. Spokesperson Tom Neumayr in a statement that Apple will appeal the decision.

"When we introduced the iBookstore in 2010, we gave customers more choice, injecting much needed innovation and competition into the market, breaking Amazon’s monopolistic grip on the publishing industry," Neumayr said. "We’ve done nothing wrong and we will appeal the judge’s decision."

Assistant U.S. Attorney General Bill Baer gave a statement Wednesday calling the decision "a victory for millions of consumers who choose to read books electronically."

"Companies cannot ignore the antitrust laws when they believe it is in their economic self-interest to do so," Baer said. "This decision by the court is a critical step in undoing the harm caused by Apple’s illegal actions."

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