In a surprise ruling, a New York district judge found Apple guilty of conspiring to raise the retail prices of e-books with publishers and violating antitrust and state laws. A trial on damages is set to follow.
Apple was accused with working with five major book publishers -- Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster -- to raise the price of new releases and bestsellers from the $9.99 price limit Amazon established, to between $12.99 and $14.99. The negotiations took place in the two months leading into the launch of the iPad and iBookstore in January 2010, and caused the prices of some e-books to double in the first half of the year, U.S. District Judge Denise 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," Cote wrote in the ruling. Without Apple's involvement, the publishers would not have been able to work together to raise prices and battle against Amazon, she added. Apple argued during the trial that its role was more passive.
"Apple did not want to compete with Amazon (or any other e-book retailer) on price; and the Publisher Defendants wanted to end Amazon’s $9.99 pricing and increase significantly the prevailing price point for e-books," Cote wrote. "Apple decided to offer the Publisher Defendants the opportunity to move from a wholesale model -- where a publisher receives its designated wholesale price for each e-book and the retailer sets the retail price -- to an agency model, where a publisher sets the retail price and the retailer sells the e-book as its agent."
Only Apple went to trial. The five publishers have already settled with the Department of Justice and individual states.
Cote said the 33 states involved in the trial are entitled to injunctive relief, which will be determined in the subsequent trial on damages. It's not yet clear how the decision will affect the pricing of e-books going forward.
An Apple spokesperson commented that Apple plans to appeal the judge's decision:
Apple did not conspire to fix ebook pricing and we will continue to fight against these false accusations. When we introduced the iBookstore in 2010, we gave customers more choice, injecting much needed innovation and competition into the market, breaking Amazon's monopolistic grip on the publishing industry. We've done nothing wrong and we will appeal the judge's decision.