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Court rules against Apple in e-book price fixing trial

updated 10:39 am EDT, Wed July 10, 2013

Decision could impact Amazon, iBookstore, future of e-book prices

Apple indeed violated antitrust laws, conspiring with publishers to fix the prices of e-books, US District Judge Denise Cote has ruled in a Manhattan court. The company is said to have colluded with Hachette, Macmillan, HarperCollins, Penguin, and Simon & Schuster in order to undermine Amazon, which until the launch of Apple's iBookstore was able to sell e-books for a standard $10. Cote notes that the publishers' switch to an agency model, prompted by talks with Apple, forced a number of e-books to climb in price to $13 or $15.

"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," the judge comments in her ruling. "Without Apple's orchestration of this conspiracy, it would not have succeeded as it did in the spring of 2010." One of the aspects' of Apple's initial iBookstore agreements gave the company "most favored nation" status, ensuring that no title could be sold for less than it was at the iBookstore.

All of the publishers settled with the Department of Justice before trial, leaving Apple as the sole defendant in the case. Settlement terms banned the publishers from following some of the terms they forged with Apple, including most favored nation clauses.

A damages trial is now expected to take place at an as-yet unscheduled date. Any payments would be received by the federal government and various states, which Cote says are entitled to injunctive relief.



By Electronista Staff
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Comments

  1. Flying Meat

    Dedicated MacNNer

    Joined: 01-25-07

    So, that crap the judge spewed at the end of the trial was just to distract the press from her pretrial foregone and announced conclusion. I get it. Way to go Amazon. Good luck book readers.

  1. LenE

    Fresh-Faced Recruit

    Joined: 05-19-04

    Travesty is not a strong enough word. I guess the DoJ and this judge felt that Apple should have either committed to losing money like Amazon was doing, or wait for Amazon to pull the price-hike trigger after definitively killing what miniscule competition they had.

    There is a reason that Amazon has it's insane P/E ratio (3,247 at the moment). It's investors do not think that it will loss lead forever. At some point, they will be forced by their shareholders to provide better value, and that's when the monopolies that they have gained with purely abusive and illegal behavior will pay off.

  1. Makosuke

    Forum Regular

    Joined: 08-06-01

    If there hadn't been an existing, fully functional, blatantly predatory monopoly in existence at the time all that was going on, you could look on the whole thing differently.

    But there was. Regardless of whatever else happened, Amazon was behaving exactly like a predatory monopoly does--dumping using their position and profits from other businesses in order to prevent competitors from having any chance of entering the market and establishing a price point that they found favorable.

    One wonders if the DoJ would be going after Amazon right now if Apple had never gotten involved and it had played out the way Amazon clearly wanted it to.

  1. And.reg

    Mac Elite

    Joined: 02-22-04

    Ditto, the court screws Apple yet again

  1. pairof9s

    Mac Enthusiast

    Joined: 01-03-08

    I still don't know where the "Smoking gun" is in this case.

    Apple states that the only way they can and will enter the market is to use an agency model; otherwise, Apple must accept the retail model or stay out altogether. It is the book companies and their desire for more revenue streams that went to Amazon and forced a change. So how is it Apple is to blame?

    It's like holding a bartender libel for someone getting drunk and driving their car...why are their decisions and its inherent consequences the responsibility of someone else?!

  1. DiabloConQueso

    Fresh-Faced Recruit

    Joined: 06-11-08

    "It's like holding a bartender libel for someone getting drunk and driving their car...why are their decisions and its inherent consequences the responsibility of someone else?!"

    You know this actually happens, right? Bars can be held responsible for serving someone to the point of inebriation, if that person happens to cause harm to themselves or another stemming from their inebriation. It doesn't absolve the inebriated person of their responsibility, though -- it's dual responsibility.

    It's called "over-serving," and bars and other establishments that serve alcohol can be held partially liable for any damage that results from over-serving patrons.

  1. RockoBoffo

    Fresh-Faced Recruit

    Joined: 06-12-13

    Apple did it. The evidence spoke to it. Apple wanted to redefine what they did, but it doesn't change the fact that they conspired with publishers to change the model - they succeeded and book prices went up.

    In a free market society, it's the job of government to ensure that these type of illegal coalitions don't take place and that competition remains.

    I wonder how many of you really believe in privilege and elitism and the wealthy few conspiring to the purchase price of minor items in order to fleece the public - is that really your value system?

    I mean whether you are progressive or conservative, the government intervening against corporate conspirators to protect the consumer - and the regular functioning of a free market society - it's one of those areas we all should agree on.

    Instead you all are just blind apple loyalists? I love apple, but the world is bigger than apple.

    The judge did the right thing - no other conclusion could be drawn from the evidence.

  1. chas_m

    MacNN Staff

    Joined: 08-04-01

    RockoBoffo: there's one problem with your post -- book prices didn't go up. I mean, yes, temporarily the bestseller titles DID go up. But e-book prices overall went DOWN. The reason? Because the agency model allowed competitors to get into the market. To overlook that fact -- that consumers *haven't* been harmed, they have *benefitted* from the agency model -- is the travesty here.

    Amazon was giving consumers a great deal, to be sure -- by selling at a loss. Do you imagine that would go on forever? No. Amazon at some point would have raised the prices on bestsellers (or go out of business, which I don't think is likely). IOW, the same thing would have happened, only instead of having options on where to buy books or what books are on offer, there would have been only one source: Amazon, and only the publishers that were willing to play ball on Amazon's terms.

    This is not a matter of blind loyalty. This has nothing to do with Apple. The DOJ and the judge are simply wrong because they focused on the wrong thing.

  1. shawnde

    Fresh-Faced Recruit

    Joined: 04-01-08

    Wow, kudos to Amazon's lobbying team? Who is the firm (does anyone know)? Whoever they are, they're really good. They can buy the DOJ and a federal judge with probably very little money. Indeed @Flying Meat got it right .... she was just using her final remarks as a distraction towards her pre-disposed judgement before the start of the trial. In my opinion, she should have been excused at the beginning of the trial. That is clearly illegal (this happened in Microsoft's anti-trust proceedings that the judge was fired).

    I think Apple should hire Amazon's lobbying team and go after them and the Music Labels for hiking the price on consumers when Amazon colluded with the labels to break the 99 cent barrier and RAISE the prices on new releases to $1.29 and lower it on the older catalogue. This was exactly the same thing that Amazon did back in 2009, and they too had a "most favored nation" clause, since the labels forced Apple to follow that pricing model as well.

  1. Flying Meat

    Dedicated MacNNer

    Joined: 01-25-07

    RockoBoffo, the agency model is not illegal. Conspiracy is illegal. They did not prove Apple "conspired."
    Apple adopted an agency model. Publishers were allowed to sign a contract and publish through Apple.

    By the DOJ's own ruling on this, they should now be going after the United States for their most favored nation trade agreements. Think of the money they'd get from that!!!

  1. pairof9s

    Mac Enthusiast

    Joined: 01-03-08

    "It's called "over-serving," and bars and other establishments that serve alcohol can be held partially liable for any damage that results from over-serving patrons."


    DiabloConQueso: Oh, I know that it is the law, but just like this case, it reflects an over extension of libel responsibility. Why is it the bartender's responsibility to know if someone drove themselves to the bar, and therefore is not legally allowed to serve someone who may become intoxicated? (and I don't mean drunk or over served, I mean legally impaired to drive a vehicle...aka, buzzed.)

    Nowhere during this trial was it shown that Apple actively conspired with publishers to force an agency model on the industry...only that this was the only way Apple could participate and thusly so should other sellers like Amazon. That the publishers chose to pursue this model to improve their sales & revenue is not the decision of Apple, and therefore their responsibility. It just seems to feel like judicial activism by this judge.

  1. Sebastien

    Registered User

    Joined: 04-29-00

    Dear God, you people need to get a clue. Read this: http://tidbits.com/article/13912

  1. panjandrum

    Junior Member

    Joined: 12-01-04

    Thanks for the link Sebastien. It's so nice to occasionally see facts here!

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