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Fruity firm ruled guilty of fixing ebook prices in 2010

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A US judge has found Apple guilty of conspiring with major publishers to fix the price of ebooks and has called for a trial on damages.

District Judge Denise Cote stayed true to her initial impressions of the case, and ruled that Apple had colluded with Macmillan, Hachette, Penguin, HarperCollins and Simon & Schuster on digital tome prices when it entered the ebook market with its iPads in 2010.

At the time, Apple - led by its co-founder Steve Jobs who died in 2011 - was competing with tech juggernaut Amazon. The fruity firm's price fixing pushed up costs for readers, and was its attempt to eliminate its rival from the market, the judge said in the ruling.

The beak 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.

The fruity firm now faces a trial on damages from various states, which the judge has said are entitled to injunctive relief.

All five publishers settled the case brought by the US Department of Justice before the trial, leaving only Apple alone in the dock to face charges stemming from the company's agency contracts with the bookhouses.

Before Apple came along, the ebook market was run in the same way as the ink-and-paper book market, where books were sold at a wholesale price and sellers then decided what price to charge consumers for them. Under this model, Amazon was steadily lowering the price of ebooks, choosing to sell them below cost price in order to shift its Kindle ereaders and establish dominance in the market.

Under the agency model, publishers decided the price of ebooks and sellers took a 30 per cent cut of that price. Moving to the model gave the bookhouses the ability to set prices, while most-favoured-nation clauses - which stopped them offering a better price to sellers than they'd given Apple - further homogenised prices.

Apple has always contended that being brought to court on antitrust charges was somewhat ridiculous, since its entry into the market helped to ease off Amazon's fast-developing stranglehold on the market. However, Judge Cote rejected that argument.

"This trial has not been the occasion to decide whether Amazon’s choice to sell NYT Bestsellers or other New Releases as loss leaders was an unfair trade practice or in any other way a violation of law," she said. "If it was, however, the remedy for illegal conduct is a complaint lodged with the proper law enforcement offices or a civil suit or both.

"Another company’s alleged violation of antitrust laws is not an excuse for engaging in your own violations of law. Nor is suspicion that that may be occurring a defence to the claims litigated at this trial."

Apple had not responded to a request for comment at the time of publication, but the DoJ said in a statement that the result was "a victory for millions of consumers".

"After carefully weighing the evidence, the court agreed with the Justice Department and 33 state attorneys general that executives at the highest levels of Apple orchestrated a conspiracy with five major publishers to raise e-book prices," the assistant attorney general in charge of the DoJ’s antitrust division, Bill Baer, said.

"Through today’s court decision and previous settlements with five major publishers, consumers are again benefiting from retail price competition and paying less for their ebooks." ®

Bootnote

Apple has reportedly declared its intention to appeal against the guilty verdict.

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