Judge Says Apple Drove Up Prices of E-Books ; Ruling Sees 'Conspiracy' to Violate Antitrust Law; Damages Trial to Follow

By Chen, Brian X | International Herald Tribune, July 11, 2013 | Go to article overview

Judge Says Apple Drove Up Prices of E-Books ; Ruling Sees 'Conspiracy' to Violate Antitrust Law; Damages Trial to Follow


Chen, Brian X, International Herald Tribune


A U.S. judge on Wednesday found that Apple violated antitrust law in helping set the retail price of e-books. Apple said it would appeal the decision.

A federal judge on Wednesday found that Apple violated antitrust law in helping set the retail price of e-books, saying the company "played a central role in facilitating and executing that conspiracy" among publishers.

"Without Apple's orchestration of this conspiracy, it would not have succeeded as it did in the spring of 2010," the judge, Denise L. Cote of the United States District Court in Manhattan, said in her ruling. She said a trial for damages would follow.

The Justice Department brought the antitrust case against Apple and five publishers a year ago, arguing that the companies had colluded to raise the prices for electronic books across the publishing market. The publishers all settled their cases, but Apple executives insisted that the company had done nothing wrong and fought the charges during a three-week trial.

Apple said through a spokesman Wednesday that it would appeal the decision.

"Apple did not conspire to fix e-book pricing and we will continue to fight against these false accusations," said Tom Neumayr, an Apple spokesman. "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."

The antitrust battle underscores the turmoil in the book industry as readers worldwide shift from ink and paper to electronic devices like tablets and smartphones, where they can buy content with the push of a button. While the publishers want to embrace new media, they are also trying to protect their profits and retain control of their business.

A survey of the publishing industry showed that in the United States, e-books accounted for 20 percent of publishers' revenue, more than $3 billion, up from 15 percent the year before. E-books have had a slower rate of adoption in Europe and the rest of the world, but analysts expect that major growth there will develop in the next several years. A report by Forrester predicted that Europe will be the largest e-book market in the world by 2017, with revenue of $19 billion.

The Justice Department said Wednesday that the judge's decision was a victory for people who buy e-books.

"Companies cannot ignore the antitrust laws when they believe it is in their economic self-interest to do so," a Justice Department statement said. "This decision by the court is a critical step in undoing the harm caused by Apple's illegal actions."

It appears unlikely that the ruling will have an immediate effect on prices. The five publishers who have already settled with the government -- Hachette Book Group, HarperCollins, Macmillan, Penguin Group USA and Simon & Schuster -- already operate under the settlement's terms, which prohibit publishers from restricting a retailer's ability to discount books.

Since the settlements have gone into effect, prices on many newly released and best-selling e-books have declined. One New York Times best-seller, "And the Mountains Echoed," by Khaled Hosseini, is sold on Amazon.com for $10.99. But other e-books seem to have held closer to pre-settlement prices: "The Ocean at the End of the Lane," by Neil Gaiman, is listed for $12.80 on Amazon.

Apple's lawyers noted at the trial that the publishers had long complained that the uniform pricing of $9.99 by Amazon, which at the time controlled about 90 percent of the e-book market, was too low. Amazon now controls about 60 percent of that market.

In his testimony, Eddy Cue, Apple's senior vice president of Internet software and services, who was in charge of negotiating deals with the publishers, conceded that Apple opened the door for book publishers to raise prices in its own e-book store. …

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