Judge Finds Apple Guilty of E-Book Price Fixing
July 10, 2013 9:20 AM
A trial for damages is soon to come
It's official: Apple lost the e-books battle.
U.S. District Judge Denise Cote in Manhattan ruled today that Apple tried to raise the prices of e-books through an agency model with other book publishers. This ruling came after a non-jury trial, which ended on June 20.
The e-books fiasco started in April 2012, when the
U.S. Department of Justice (DOJ) sued Apple and the five book publishers
over anticompetitive practices concerning e-book sales. These book publishers were Hachette Livre (Lagardère Publishing France), Harper Collins (News Corp., U.S.A.), Simon & Schuster (CBS Corp., U.S.A.), Penguin (Pearson Group, United Kingdom) and Verlagsgruppe Georg von Holzbrinck (owner of inter alia Macmillan, Germany).
The book publishers were accused of partaking in an agency sales model with Apple, which meant that publishers were allowed to set the price of a book and Apple would take a 30 percent cut. In addition, the publishers could not let rivals sell the same book at a lower price. Traditionally, publishers sell physical books to retailers for about half of the cover price, which is considered a wholesale model. Retailers then had the ability to sell those books to customers for a lower price if they wanted to.
But when e-books came along, this model was challenged. Amazon started selling best sellers for as low as $9.99 to encourage its Kindle e-reader sales. Publishers were not happy.
Apple then came along
, and publishers began to worry that it would take over the book industry the way Apple's iTunes took over the music industry, where customers would choose to purchase cheap, digital books instead of physical books.
However, Apple attempted to resolve this when it struck a deal with publishers to implement the agency model in 2010. This helped Apple at the time of its iPad and iBooks launch.
But its deal with publishers made it seem like an attempt to thwart Amazon's dominance.
USA vs. Apple E-Book Decision
Back in May, Cote
sided with DOJ
in a preliminary hearing after
an old email from former Apple CEO Steve Jobs
was presented as evidence in the e-books case. The email (dated in 2010) from Jobs to James Murdoch of News Corporation said, "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.”
Last month, Lawrence Buterman (a DOJ lawyer) said that Apple's move to increase e-book prices hurt consumers by costing them
"millions of dollars."
"Apple told publishers that Apple - and only Apple - could get prices up in their industry," said Buterman. "Overall, average prices of e-books went up, costing consumers millions of dollars."
All of the five book publishers have already settled with the DOJ, and now, Apple has received its answer as well after a trial that began June 3. But a trial for damages is soon to come.
"This is about the Internet. Everything on the Internet is encrypted. This is not a BlackBerry-only issue. If they can't deal with the Internet, they should shut it off." -- RIM co-CEO Michael Lazaridis
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