Apple “Orchestrated” Conspiracy To Raise E-Book Prices, Says Judge
In a major defeat for tech giant Apple, a federal judge ruled yesterday that the company colluded with book publishers to undercut Amazon’s dominance of the e-book retail sector. The decision is a major setback for Apple’s burgeoning iBooks app, and could help keep e-book prices at the under-$10 level that Amazon has established.
In a 159-page decision, US District Judge Denise Cote found that Apple was guilty of conspiring with the major US publishing houses to raise e-book prices. It allegedly did this specifically targeting Amazon’s pricing model. Until recently, Amazon controlled 90% of the e-book market. The company stubbornly kept e-book prices no higher than $9.99, even selling e-books below cost to promote their Kindle readers. This angered publishers, who felt the prices were artificially devaluing their products, as well as undercutting paper books.
Apple offered a new pricing system for e-books and publishers. Every publisher (except Random House) made a deal with Apple, and used it as leverage against Amazon. Amazon was forced to raise its e-book prices, e-book prices went up across the industry, and Amazon immediately saw its market share drop (though it still controls a majority).
“Without Apple’s orchestration of this conspiracy, it would not have succeeded as it did in the spring of 2010,” wrote Cote.
The lawsuit was brought by the US Department of Justice and dozens of states.
Hayley Tsukayama at The Washington Post says that in the short term, this decision will have little effect on consumers, as e-book prices went back down after the publishers settled with the DOJ earlier.
Apple still denies the charges. During closing arguments last month, an Apple lawyer said, “There is no such thing as a conspiracy by telepathy.”