In a sweeping rejection of Apple Inc’s strategy for selling electronic books on the Internet, a federal judge ruled that the company conspired with five major publishers to raise ebook prices.
US District Judge Denise Cote in Manhattan found “compelling evidence” that Apple violated federal antitrust law by playing a “central role” in a conspiracy with the publishers to eliminate retail price competition and raise ebook prices.
Wednesday’s decision could expose Apple to substantial damages. It is a victory for the US Department of Justice and the 33 US states and territories that brought the civil antitrust case. The five publishers previously settled.
Apple was accused of conspiring to undercut Amazon.com Inc’s ebook dominance, causing some ebook prices to rise to US$12.99 or US$14.99 from the US$9.99 that Amazon charged. Amazon once had a 90 percent market share.
“Apple chose to join forces with the publisher defendants to raise ebook prices and equipped them with the means to do so,” Cote said in a 159-page decision. “Without Apple’s orchestration of this conspiracy, it would not have succeeded as it did.”
The decision was not a total surprise, as Cote had indicated before the two-and-a-half-week non-jury trial began on June 3 that Apple’s defenses might fail.
“This result is a victory for millions of consumers who choose to read books electronically,” Bill Baer, head of the Justice Department’s antitrust division, said in a statement. “This decision by the court is a critical step in undoing the harm caused by Apple’s illegal actions.”
Baer said Cote’s decision, together with the earlier settlements, help consumers by reducing prices of ebooks.
Cote set an Aug. 9 hearing to discuss remedies, and plans to hold a trial on damages. She also ordered both sides “to pursue settlement discussions” under the supervision of her colleague, US District Judge Kimba Wood.
Amazon now controls about 65 percent of the ebook market, while Barnes & Noble Inc has about 20 percent and Apple a single-digit percentage, according to Albert Greco, a book industry expert at Fordham University’s business school.
In a statement, Apple said it would appeal Cote’s decision.
“Apple did not conspire to fix ebook pricing,” spokesman Tom Neumayr 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.”
Last year, Apple settled a separate antitrust case over ebook pricing with the European Commission, without admitting wrongdoing.