Andre Yoskowitz
10 Jul 2013 19:32
While all the major publishers involved settled before going to trial, Apple tried their luck with a court case.
A federal judge has ruled today that Apple is guilty of conspiring with five major book publishers to raise e-book prices. U.S. District Judge Denise Cote in Manhattan says she found "compelling evidence" that Apple repeatedly violated federal antitrust law by conspiring and eventually eliminating competition and raising ebook prices for consumers.
The case was brought by the U.S. DOJ and 33 U.S. states and should expose Apple to damages that could be in the hundreds of millions. The publishers settled for $166 million combined but Apple's share may be triple that.
"Apple chose to join forces with the publisher defendants to raise e-book prices and equipped them with the means to do so," Cote said in a 159-page decision. "Without Apple's orchestration of this conspiracy, it would not have succeeded as it did."
The "agency model" of pricing created by Apple in 2010 before the launch of the iPad, had publishers set the price for ebooks while retailers took a commission, normally 30 percent. This led to higher prices for consumers, with Cote saying average prices went up 18 percent.
With their settlements, the publishers all had to break their agency pricing models, allowing retailers to now discount at will, again. Before Apple, Amazon was selling ebooks at cost in an effort to boost Kindle sales. Ebooks were selling for about $9.99 at the time. After Apple, prices jumped to $12.99 -$14.99.