Apple and 5 publishers found guilty of e-book price fixing

11/07/2013

Apple has been found guilty of working with 5 major publishers, including Penguin, to raise prices of electronic books in the US.

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In her ruling, US judge Denise Cote said there was "overwhelming" evidence showing the company acted knowingly and unlawfully in breaking anti-trust laws.

The civil case related to Apple's entry into the electronic book market in 2010 with its iBookstore.

Publishers at the time were unhappy with Amazon's practice of charging $9.99 (£6.68) for bestsellers but were unable to change it until Apple helped organise the group, ruled the judge.

Customers ended up paying as much as $5 extra for a book, said US government lawyers.
Statements from Apple co-founder Steve Jobs were also cited in court as proof of the wrongdoing.

These included a remark to his biographer boasting that the publishers "went to Amazon and said, 'You're going to sign an agency contract or we're not going to give you the books.'"

Apple said it would appeal against the decision and has always denied the charges, insisting its entry into the e-book market was actually good for competition.

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

The five publishers named in the conspiracy all settled out of court, leaving the technology giant to fight the case alone.

Penguin settled its case for $75m (£49m). Hachette, HarperCollins and Simon & Schuster created a $69m fund for refunds to consumers, while Macmillan settled for $26m.
It was the collusion between publishers and Apple that caught the eye of regulators and led to today's decision.

The court relied heavily on incriminating internal emails from Apple's Senior Vice President, Eddy Cue, to each of the publishers named in the lawsuit.

Judge Cote said: "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.

"Without Apple's orchestration of this conspiracy, it would not have succeeded as it did in the spring of 2010," she said.

The trial focused on late 2009 and early 2010 when Apple negotiated contracts with publishers ahead of its iPad launch.

It proposed a more profitable business model where publishers could dictate the final retail price - as long as Apple got a 30% cut.

Amazon.com was instead working on a wholesale model where it decided what price to charge customers. However, the publishers threatened to withhold titles if it did not switch to the Apple model.

Assistant Attorney General Bill Baer called the judge's ruling "a victory for millions of consumers who choose to read books electronically."
Damages will be decided at a later date.

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