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Court Rules Apple Conspired to Raise Prices of E-Books

| July 10, 2013
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Apple’s iPad, the device many prefer for reading e-books.(JUNG YEON-JE/AFP)

NEW YORK (AP) — Apple Inc. broke antitrust laws and conspired with publishers to raise electronic book prices, a federal judge ruled Wednesday, citing “compelling evidence” from the words of the late Steve Jobs.

U.S. District Judge Denise Cote said in her ruling on USA v. Apple et al. (full ruling at end of post) that the Cupertino-based company knew no publisher could risk acting alone to try to eliminate Amazon.com’s $9.99 price for the most popular e-books so it “created a mechanism and environment that enabled them to act together in a matter of weeks to eliminate all retail price competition for their e-books.”

Cote, who did not determine damages, added: “The evidence is overwhelming that Apple knew of the unlawful aims of the conspiracy and joined the conspiracy with the specific intent to help it succeed.”

Apple spokesman Tom Neumayr said the Cupertino-based company planned to appeal.

“Apple did not conspire to fix e-book pricing and we will continue to fight against these false accusations,” he said. “We’ve done nothing wrong.”

Assistant Attorney General Bill Baer called the ruling “a victory for millions of consumers who choose to read books electronically.”

He said the judge 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.

“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 e-books,” he said.

Apple attorney Orin Snyder had told Cote previously that she would set a “dangerous precedent” if she concluded that Apple manipulated e-book prices as it entered the market in 2010. He did not immediately respond to a message for comment Wednesday.

Neumayr said Apple’s introduction of the iBookstore “gave customers more choice, injecting much needed innovation and competition into the market, breaking Amazon’s monopolistic grip on the publishing industry.”

The government claimed Apple and the publishers agreed to a pricing policy that forced millions of consumers to pay several dollars more for most online books. In her ruling, Cote said “compelling evidence of Apple’s participation in the conspiracy came from the words uttered by Steve Jobs, Apple’s founder, CEO and visionary.”

She quoted Jobs, who died in 2011, as saying he understood publishers’ concerns that Amazon’s $9.99 price for new releases was eroding the perceived value of their products and that Apple was willing to try pricing e-books at $12.99 and $14.99. She noted that Jobs bought an e-book for $14.99 at the launch of Apple’s e-book store and told a reporter that day that Amazon’s $9.99 price for the same book would be irrelevant because soon all prices will “be the same.”

“Apple has struggled mightily to reinterpret Jobs’s statements in a way that will eliminate their bite,” Cote wrote in the 160-page opinion. “Its efforts have proven fruitless.”

Cote said damages could be determined at a later point, though she did not immediately schedule a trial on them.

The state attorneys general are seeking unspecified damages. The federal government is seeking an order that Apple be banned for two years from agreements that let publishers rather than retailers set prices and that the company be prohibited from future antitrust law violations. The Justice Department also is asking Apple to establish an antitrust compliance program and antitrust training for executives and to put in place an independent monitoring trustee.

The trial had featured testimony from executives for Apple, publishers and Seattle-based Amazon.com. Witnesses from the publishing industry conceded that they were disappointed that Amazon.com was selling e-books so inexpensively when Apple came along in late 2009 with plans for its e-book store.

“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.”

Judge: Apple Conspired with Publishers to Raise Prices on Electronic Books

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