Price- fixing conspiracy
A U. S. judge has found that Apple Inc. ‘ played a central role’ in conspiring with five publishers to fix the price of electronic books.
Apple Inc., the world’s biggest technology company, “played a central role” in conspiring with five publishers to fix the prices of electronic books, and will face a trial to set damages, a federal judge ruled on Wednesday.
U. S. District Judge Denise Cote, ruling in a suit brought by the U. S. government and 33 state attorneys general, said Apple lost the case, in part, because of statements by its deceased founder, Steve Jobs, that government lawyers said showed Apple was targeting ebook leader Amazon. com Inc.
The ruling means that Apple will be ordered to stop its price- fixing conspiracy and may have to pay triple damages for overcharging customers. The Justice Department isn’t seeking damages. Apple said it will appeal.
“The plaintiffs have shown that the publisher defendants conspired with each other to eliminate retail price competition in order to raise ebook prices, and that Apple played a central role in facilitating and executing that conspiracy,” Cote said in her opinion.
While Apple said during the trial that is has about 20 per cent of the ebooks market, the sales are a fraction of its overall business. Apple had $ 156.5 billion in sales last year, with about half that coming from the sale of iPhones.
The U. S. sued Apple and five of the biggest publishers in April 2012, claiming the maker of the iPad pushed publishers to sign agreements letting it sell digital copies of their books under a model that raised prices and harmed consumers. In that so- called agency model, publishers, not retailers, set book prices, with Apple getting 30 per cent.
The intent was to force Amazon. com, the No. 1 ebook seller, to change its pricing model. At the time, Amazon was selling electronic versions of best- selling books for $ 9.99, which was often below cost.
When Apple entered the ebook market in 2010, it reached agreements with the five publishers to let it sell digital copies of their books under the agency model. A “most favored nation” clause in the contracts meant that Apple could match lower prices charged by Amazon and other ebook retailers.
“Through the vehicle of the Apple agency agreements, the prices in the nascent ebook industry shifted upward, in some cases 50 per cent or more for an individual title,” Cote said in her ruling. “Virtually overnight, Apple got an attractive, additional feature for its iPad and a guaranteed new revenue stream, and the publisher defendants removed Amazon’s ability to price their ebooks at $ 9.99.”
Apple, based in Cupertino, Calif., was the last defendant in the case after the publishers avoided trial by settling.
The publishers are Verlagsgruppe Georg von Holtzbrinck GmbH’s Macmillan unit, CBS Corp.’ s Simon & Schuster, Lagardere SCA’s Hachette Book Group, Pearson PLC’s Penguin unit and News Corp.’ s HarperCollins. The No. 1 publisher, Bertelsmann SE’s Random House Inc., wasn’t involved.