​Apple gets smacked by $450-million e-book price-fixing fine

Publishers are also unhappy with the Supreme Court's decision. At Amazon headquarters, however, they're probably popping open the champagne.
Written by Steven Vaughan-Nichols, Senior Contributing Editor

The Supreme Court of the United States has declined to hear Apple's appeal of a lower court decision that it conspired with five publishers to increase e-book prices. Apple must now pay $450 million as part of its anti-trust e-book settlement. Amazon, however, is probably grinning like the Cheshire Cat.


Apple and, by extension, its publisher buddies, have been found guilty of e-book price fixing.


This decision leaves in place the 2nd U.S. Circuit Court of Appeals that found Apple liable for engaging in a conspiracy with five major book publishers to fix pricing on e-books. What Apple was attempting to do so was establish itself as an e-book middleman and damage Amazon's dominant position. The Circuit Court held that Apple violated the Sherman Antitrust Act by working with the book publishers to set unfair prices.

The publishers Apple had joined forces with were Hachette; News Corp's HarperCollins; Penguin Group Inc; Macmillan; and Simon & Schuster, a division of CBS (ZDNet's parent company).

Apple had maintained that, "Apple did not conspire to fix e-book pricing and this ruling does nothing to change the facts We are disappointed the Court does not recognize the innovation and choice the iBooks Store brought for consumers. While we want to put this behind us, the case is about principles and values. We know we did nothing wrong back in 2010."

Before SCOTUS' final decision, an unusual alliance of booksellers (including Barnes and Noble), the American Booksellers Association, and the Author Guild filed an Amicus Curiae, friend of the court, petition in Apple's favor.

The publishers, booksellers, and writers united because all agreed that "competition is vital to the book industry." And, the group stated, "In late 2009, the market for retail distribution of electronic books ("e-books") was essentially a monopoly, with Amazon.com, Inc. ("Amazon") controlling 90% of e-book sales. Amazon sold many of the most popular e-books at a loss, making it difficult for other retailers to enter the e-book market as they 'would run the risk of losing money if [they] tried.'"

With "Apple's entry into the e-book market," they argued, "a single distributor no longer controlled the electronic marketplace of ideas." The Department of Justice (DoJ) wasn't impressed. They argued that Apple had "orchestrated a conspiracy with five major publishers to eliminate retail price competition and raise e-book prices." The DoJ maintained that the illegal scheme has raised some e-book prices to $12.99 or $14.99 from $9.99.

SCOTUS sided with the DoJ. They decided to simply let the 2nd U.S. Circuit Court of Appeals decision stand.

The DoJ is pleased with this decision. In a statement, Bill Baer, head of the DoJ's antitrust division said "Apple's liability for knowingly conspiring with book publishers to raise the prices of e-books is settled once and for all. Baer added that Apple and the publishers' price-fixing conspiracy was nothing less than "cynical misconduct."

Buyers of Apple e-books can expect to see a small amount returned to them from the final resolution of this class-action lawsuit. $400 million is to go to e-book customers while $50-million will go to the class-action law firms.

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