Apple found guilty of orchestrating e-book pricing conspiracy

By , Jul 10, 2013

iPad 3 advert (flipping e-book page)

A court Wednesday found Apple had conspired to increase the prices of e-books, setting a separate trial for damages.

In a 159-page decision, U.S. District Court Judge Denise Cote wrote that “Apple played a central role” in the conspiracy, which the company flatly denied.

The government has charged Apple with working with five publishers together to undercut Amazon’s control of the market. In response to the verdict, some watchers opined that the government playing so openly into the hand of a monopolist like Amazon may reduce competition…

Reuters and Bloomberg have this quote from Cote’s ruling:

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 the conspiracy.

She also wrote that “Apple seized the moment and brilliantly played its hand”.

As a result of the collusion, some e-book prices rose to $12.99 or $14.99 from the $9.99 charged by Amazon, the court said. Apple was the only remaining defendant in the case, after publishers settled with the U.S. government and various states.

A trial for damages will follow soon. Apple will of course appeal the ruling. “We will continue to fight against these false accusations,” Apple told AllThingsD.

Apple did not conspire to fix ebook pricing and we will continue to fight against these false accusations.

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.

In a statement, the U.S. Department of Justice called the ruling “a victory” for millions of consumers who choose to read books electronically.

Through today’s court decision and previous settlements with five major publishers, consumers are again benefitting from retail price competition and paying less for their e-books.

Apple executives hoped to ensure that its e-book business would be free from retail price competition, causing consumers throughout the country to pay higher prices for many e-books

Orin Snyder, Apple’s lawyer Orin Snyder said in a written statement in response to Judge Cote’s May statement that she believed the government would prove its case.:

We strongly disagree with the court’s preliminary statements about the case.

The court made clear that this was not a final ruling and that the evidence at trial will determine the verdict.

This is what a trial is for.

At the heart of the case was the launch of Apple’s iPad in 2010 and the iPad maker’s use of the so-called agency pricing model, which afforded publishers more flexibility in terms of pricing while Apple held on to its customary 30 percent cut.

“Without Apple’s orchestration of this conspiracy, it would not have succeed as it did in the spring of 2010,” Cote wrote.

Throughout the bench trial, which concluded June 20, Apple argued its innocence.

Apple CEO Tim Cook, Internet services guru Eddy Cue, and even a memo from the late Steve Jobs were part of the company’s testimony. In one statement, Jobs wrote this to HarperCollins’s James Murdoch:

Throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99.

Here’s Jobs touching on the subject in a brief chat with Walt Mossberg.

Tim Cook called litigation a “bizarre” case, arguing:

We’ve done nothing wrong there, and so we’re taking a very principled position. We’re not going to sign something that says we did something we didn’t do. So we’re going to fight.

Just days before the trial’s conclusion, Apple’s high-priced legal team virtually dismantled a witness from Google, making a direct eye-witness to the conspiracy admit the evidence was instead second- or third-hand.

As is customary, Apple had no immediate response to its court loss.

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  • forgottentowel™

    1. Raise e-book prices

    2. Use high prices to undercut Amazon

    3. ???

    4. Court case

    • Pitchy

      your 3. should be: remove ability of all ebook apps from making in app purchases after the release of iBooks.

      • forgottentowel™

        That would be:

        a) factually inaccurate. Apple didn’t remove the ability to make in-app purchases, they removed the ability to make in-app purchases outside of their own system.

        b) in violation of underpants gnome meme syntax.

      • Pitchy

        So if what you are saying is true, then I should be able to open my Kindle app, buy a book directly from Amazon the way I could a few years ago and not have to go through iBooks.

      • forgottentowel™

        If Amazon was willing to pay Apple an exorbitant percentage then yes, you would be able to. Amazon is (understandably) not willing to pay Apple 30% for every e-book sold, so no in-app purchases for you.

        To restate; Apple did not remove in-app purchases from all apps except iBooks, they removed in-app purchases via all methods except the App Store – and this for *all* in-app purchases, not just e-books.

      • Pitchy

        See, the problem is that they were able to make in app purchases before iBooks. It was never an issue. Then iBooks came out and still no one was buying ebooks via iBooks, so Apple starts conspiring. They block the sale of all ebooks outside of their ecosystem whereas before it was never an issue. Then next comes the talks with the publishers and thus the lawsuit.

  • Tyler

    omg a business trying to make more money!!! ahhhhh so scary

  • Al

    I’m not saying Apple is right and wrong here.

    But the goverment is going after Apple in fixing prices. Why don’t they go after carriers and their price fixing, especially with AT&T and Verizon.

    • https://twitter.com/MrElectrifyer MrElectrifyer

      I presume that’s the next step…

  • Chindavon

    Oh just wonderful. Love our U.S. groups trying to take down America’s most successful company. WTH

  • stevesup

    Perhaps this is the outcome Apple wanted. Like Amazon, Apple can now really fix prices; publishers not so much. So maybe Apple will set them at a buck a book. Add ten bucks to the cost of an iPad to cover the dif. Result: Amazon takes it in the neck cus’ it promised Wall Street it would give away hardware and make it back on books by gouging publishers and buyers both once it’s the last bookseller standing.

  • http://www.funtechblog.wordpress.com./ Bobby McBobson

    mkay

  • https://twitter.com/MrElectrifyer MrElectrifyer

    “When we introduced the iBookstore in 2010, we gave customers more choice”

    Total BS. Locking out the option to purchase directly from other sources is not considered “more choice” to non-isheeps…