Judge Nails Apple for Fixing E-Book Prices

MANHATTAN (CN) - Apple conspired with five major book publishers to raise prices on e-books and now faces a trial on damages, a federal judge ruled Wednesday.

"Apple chose to join forces with the publisher defendants to raise e-book prices and equipped them with the means to do so," U.S. District Judge Denise Cote wrote in a 159-page opinion that capped off a nearly three-week bench trial.

"Through their conspiracy they forced Amazon (and other resellers) to relinquish retail pricing authority and then they raised retail e-book prices," Cote wrote. "Those higher prices were not the result of regular market forces but of a scheme in which Apple was a full participant."

The U.S. Department of Justice and 33 states filed federal antitrust suits against Apple last year in Manhattan, saying that the company and five book publishers conspired to raise, fix and stabilize the retail price for newly released and bestselling trade e-books amid Amazon's dominance of the new market.

Apple was the last defendant standing in the government's antitrust case against six of the world's leading publishers and two subsidiaries. Hachette, HarperCollins, and Simon & Schuster all settled in April 2012. Penguin settled in December, and Macmillan settled two months later.

Cote found that Apple helped the publishers raise e-book prices to ensure that it would make a profit on the iBookstore when it launched the iPad in 2010.

"Through the vehicle of the Apple agency agreements, the prices in the nascent e-book industry shifted upward, in some cases 50% or more for an individual title," Cote wrote. "Virtually overnight, Apple got an attractive, additional feature for its iPad and a guaranteed new revenue stream, and the publisher defendants removed Amazon's ability to price their e-books at $9.99."

Cote said the conspiracy "changed the face of the e-book industry."

Wednesday's verdict "is a victory for millions of consumers who choose to read books electronically," Bill Baer, assistant attorney general in charge of the DOJ's antitrust division, said in a statement. "Consumers are again benefiting from retail price competition and paying less for their e-books."

Apple maintains that the allegations are false and has said it will appeal the decision.

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