Judge Rules that Apple Conspired to Fix E-Book Prices

Senior Editor

Technology giant Apple Inc. “forcefully facilitated” a conspiracy with other publishing companies to fix the price of E-books and weaken Amazon’s influence over the market, a federal court judge ruled on Wednesday, in a closely watched case.

In her decision, U.S. District Court Judge Denise Cote cited the statements and records of officials from a number of publishing companies, who said that Apple helped rally them to the cause of taking on Amazon and its comparatively low prices, with the intent of “altering the landscape” of the market. The judge also cited the statements of the late founder and CEO of Apple, Steve Jobs, as having revealed the company’s motives in shaping the market.

Earlier this year, a group of publishers, including Pearson, a worldwide publisher of education products, had agreed to settle a class-action lawsuit accusing them of price-fixing, which had emerged from a legal action brought by 33 individual state attorneys general. But Apple did not agree to that settlement. In her decision, Cote said she found compelling evidence that Apple has encouraged other publishers to join with the company in taking on Amazon.

Apple is a major player in developing products, including iPads, laptops and other devices, for the nation’s schools. The court case did not focus on education-focused e-books, specifically, but rather on trade books, or general-interest fiction and nonfiction books, and not academic textbooks or other reference materials.

Even so, the case could touch educators and students to the extent that it affects overall pricing for e-books, which are popular among young people. As we’ve reported previously, a recent nationwide survey showed that 46 percent of children in the United States reported having read an e-book, up from 25 percent in 2010, using tech tools such as laptops and iPads to do so.

“There is overwhelming evidence that the publisher defendants joined with each other in a horizontal price-fixing conspiracy,” wrote Cote, based in the U.S. District Court of the Southern District of New York, in her ruling.” Through that conspiracy, Apple and other publishers “raised the prices of many of their new releases and [New York Times] bestsellers above the $9.99 price at which they had previously been sold through Amazon.”

Writes Cote:

In the end, it is essential to remember that the antitrust laws were enacted for “the protection of competition, not competitors”… The question in this case has always been a narrow one: whether Apple participated in a price-fixing scheme in violation of this country’s antitrust laws. Apple is liable here for facilitating and encouraging the publisher defendants’ collective, illegal restraint of trade. Through their conspiracy they forced Amazon (and other resellers) to relinquish retail pricing authority and then they raised retail e-book prices. Those higher prices were not the result of regular market forces but of a scheme in which Apple was a full participant.

In a statement, Apple vowed to appeal the ruling.

“Apple did not conspire to fix e-book pricing and we will continue to fight against these false accusations,” the company said. “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. We’ve done nothing wrong and we will appeal the judge’s decision.”

Originally published on the Digital Education blog.

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