Apple violated antitrust law in ebook price fixing conspiracy

Apple violated antitrust law in ebook price fixing conspiracy

Summary: In breach of U.S. federal antitrust law, Apple and five other publishers conspired to fix and raise ebook prices in order to undercut Amazon's dominant position in the market.

TOPICS: Apple, Amazon
(Image: CNET)

Apple has violated U.S. antitrust law by conspiring to fix ebook prices, a federal judge told the company in New York City on Wednesday.

The trial, which began in June, concluded to a degree after U.S. District Judge Denise Cote said in a Manhattan courtroom that the iPhone and iPad maker colluded with five others to raise prices of ebooks.

A separate trial will be held to determine damages.

According to Cote, the backroom discussions and negotiations, in breach of federal law, resulted in some prices raised significantly to $12.99 or $14.99, when Amazon sold the same ebooks for $9.99.

The move by Apple et al was to push back on Amazon's dominant position in the ebook selling market, according to the U.S. Justice Department, which rose to dominance partly due to its low-priced Kindle e-reader and its head start on selling books and magazines through its online retail outlet.

Apple was accused of colluding with Hachette Book Group Inc, Macmillan, News Corp.'s HarperCollins, Pearson Plc., Penguin Group, and Simon & Schuster (which is owned by CBS Corp., the parent company of ZDNet), which all settled with the U.S. government.

But Apple said it would fight until the end, insisting that it had not done anything wrong.

"The plaintiffs have shown that the publisher defendants conspired with each other to eliminate retail price competition in order to raise ebook prices, and that Apple played a central role in facilitating and executing that conspiracy," said Cote in the 159-page decision.

"Without Apple's orchestration of this conspiracy, it would not have succeeded as it did," Cotes added.

Apple told ZDNet's sister site CNET in an emailed statement that it "did not conspire to fix ebook pricing," and the company will continue to fight against what it called "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," the statement said.

The Justice Department said in published remarks that the judge's decision is a "victory for millions of consumers who choose to read books electronically."

"Companies cannot ignore the antitrust laws when they believe it is in their economic self-interest to do so. This decision by the court is a critical step in undoing the harm caused by Apple's illegal actions," the statement said.

Topics: Apple, Amazon

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  • Thud.

    Did anyone expect anything other than this?
    Good call.
  • I'm so happy today

    Amazon just crushed apple twice this week. First apple loses the app store trial and now they are convicted of being anti competitive against Amazon.

    What a glorious week.

    Time to break apple up into little chunks so this can never happen again. I also think they should implement a ballot box when you first start any apple product so you can choose your store. Also, apple should be forced to allow Amazon (and other harmed companies) to have links in their ios apps taking them to their stores and allowing them to bypass apple's anti competitive (newly convicted) 30% tax.

    Wonderful news.

    Can't wait to see apple's ZDNet astro turfers trying to spin this one away from the fact that apple is a convicted market manipulator.
    • So you're saying Apple

      Is just like your employer/deities? Bing your a Microsoft MVP/Evangelist/Fanboy. It was a dead give away when you proclaimed Microsoft was the only one that "got it right" (Mr. Miller)
      Troll Hunter J
      • Note the apple employee plan A

        Deflect. Bring up other companies that have nothing to do with this case where apple was convicted of manipulating the market, a clear violation of anti trust law.

        Can't wait to see what script apple's marketing department is going to release onto ZDNet as plan B.
        • Please note...

          ...that this finding does nothing at all to excuse the market rigging activities of a certain large software company that shall remain nameless.
          John L. Ries
          • Why are you responding to my post with this?

            Who_said this_ruling has_anything to_do with_any other_ruling? How_many times_do I_have to_say it_doesn't?

            This_ruling stands_on its_own. apple_is a_convicted_market_manipulator who_has_been caught_in_its market_rigging_activities. Other_rulings_against other_companies in_other markets_at other_times are_irrelevant.
          • No objections

            I was merely stating an additional stipulation. We can talk about Apple's misdeeds today and ignore the 500 lb gorilla for now.
            John L. Ries
    • I have no such intentions

      I've long suspected that in the past, the the only reason why Apple stayed out of antitrust trouble was because it didn't have the market power to effectively restrain trade, not because Steve Jobs didn't want to.
      John L. Ries
      • So true

        It just seems that whenever companies like these get so big they start using their size in ways that break anti-trust laws.

        Microsoft was getting it in the 90's
        Apple and Google are both in hot water right now.
        In a few years it may be Samsung and Amazon if they keep growing at the rates they are.

        I wonder if they actually realize the moment when they go from being competitive to breaking laws.
        • I've often wondered the same

          "I wonder if they actually realize the moment when they go from being competitive to breaking laws."

          It would seem the same practices can be both legal and illegal depending on the success of those practices. If two companies use the same tactics to grab market share, one sufficiently successful as to produce a monopolistic position, they can be investigated, while the 'little guy' will face no such review.
          Little Old Man
    • If there's no such thing as right or wrong...

      ...why do you care about the issue at all?
      John L. Ries
  • companies usually deflate prices...

    Companies that collude to raise prices to combat a lower-priced competitor that's already in the lead makes no sense. Customers will still flock to the low low price so amazon could not be unseated this way
    • Not when there is a monopoly on supply

      There is a monopoly on the supplier of "Game of Throne" licenses, for example. apple formed a cartel with each supplier of popular books and they colluded to force Amazon to accept the new prices or face the prospect of not being able to sell popular books. Customers can't flock to Amazon's low low prices if Amazon has no stock. apple was using their sizeable market power to extinguish Amazon's supply of oxygen. This is illegal and despite what you are going to read from apple employees here on ZDNet who are not lawyers, a real judge has proclaimed it to be true.
      • What about Music?

        So a few years back when the record companies wanted to be able to charge more for their songs, and went to Amazon who gave them the ability to do that, which resulted in $1.29 songs instead of $.99 songs, were you wanting Amazon to be broken up? Apple got threatened with losing access to entire catalogs unless they would raise the price. Were you upset that Amazon was using their sizable market to extinguish Apple's supply of oxygen?

        Consumers now pay $1.29 for many songs that were $.99 before Amazon came along to the music business.
        • Was Amazon convicted of manipulating the market?

          No? Then it is irrelevant.

          It is also irrelevant because Amazon acting badly (which they weren't convicted of) does not excuse apple for violating the law (which they were convicted of).

          Again, note the script coming out of apple's marketing department. Their first attempt at spinning this is to deflect attention away from the fact that apple is a convicted market manipulator. It won't work.
          • Its completely relevant

            Its basically the exact same thing but with Apple and Amazon switched, and with music instead of books.

            I am not excusing or defending Apple, just pointing out that the same thing happened earlier but nobody complained to the DOJ.

            Why are you not upset about the fact that consumers have to pay more for music because ? Amazon and music publishers basically colluded to raise the price of music, yet all those like you who love to bash Apple seem to excuse that fact or ignore it.
          • It is completely irrelevant

            Someone convicted of a murder they committed has no moral or legal justification to say that it isn't fair they got convicted when OJ Simpson didn't. Whether or not any other company in the history of the world has gotten away with doing something wrong does not excuse what apple did or make it unfair or unjust that apple was just convicted of breaking anti trust law.

            One could easily make a case that apple has gotten away with a lot of identical behavior that others have been punished for. It doesn't matter. It is irrelevant.

            Today, apple was found to be guilty in a court of law. What happened yesterday to some other company in some other market is irrelevant. Today, apple is a convicted market manipulator. That is all that is relevant.
        • $1.29 for DRM-free MP3s at Amazon, i believe...

          ...that you can listen to on any device - instead of proprietary DRM on Apple devices that's makes impossible to listen to them on any other music player AND very hard to even transfer music from one iPod to another.
          • Wrong

            Apple's music tracks have been DRM free for years now - in fact they were the leader in DRM free music.
          • I'm so glad you posted this

            You just proved it was APPLE that raised the price on music, crushing yoshi's attempted deflection:

            April, 2007

            "DRM-Free Songs from EMI Available on iTunes for $1.29 in May"

            September 2007 (beta) or January 2008 (launch)


            "Initial reaction to Amazon MP3 was generally positive. The unofficial Apple Weblog praised the lack of DRM especially given that track prices were cheaper than iTunes Plus songs at launch"

            Note the timeline. apple raised the price to $1.29 first. Note that apple bloggers admitted Amazon prices were lower than apple's.

            Sorry apple marketing department, time to give yoshi a new script.