Apple has been dealt a major legal blow in the United States, with a court finding the tech giant colluded with publishers in the price fixing of eBooks.
The lawsuit, which has been ongoing for several months and was brought against Apple by the Department of Justice, accused the company of convincing publishers to use a new funding model that was actually less competitive.
Instead of an online retailer buying eBooks at wholesale prices and setting the retail price charged to customers, Apple’s new funding model gave publishers the power to set its retail prices, in exchange for a commission.
Overnight, US District Judge Denise Cote found there was “compelling evidence” Apple violated antitrust law as a result, and played a “central role” in the plan to essentially erase retail price competition.
“Apple chose to join forces with the publisher defendants to raise eBook prices and equipped them with the means to do so,” Cote found in her decision. “Without Apple’s orchestration of this conspiracy, it would not have succeeded as it did.”
Apple attempted to argue that even though this price fixing process may have been less competitive, it actually increased competition by crushing a monopoly controlled by Amazon – which controls nearly two-thirds of the eBook market.
Apple chief executive Tim Cook even called the case “bizarre” in an interview last month. In a statement, Apple claims it did not conspire to fix eBook prices, saying “we’ve done nothing wrong”. An appeal is likely imminent.
Apple settled with the European Commission last year in a similar case, but did not admit any wrongdoing.
While the decision isn’t likely to have any immediate effect on eBook prices, as prices have already fallen, Bill Baer, the head of the Department of Justice’s antitrust division, calls the finding a “victory”.
“This decision by the court is a critical step in undoing the harm caused by Apple’s illegal actions.”
The publishers involved in the case have already reached settlements with the Justice Department regarding their individual liabilities. This is why the Apple decision isn’t likely to make much of an impact on prices – those settlements with publishers already achieved that.
A remedies hearing has been set for August 9.
Apple’s argument was a curious one: It actually increased competition by breaking a monopoly controlled by Amazon.
Last month, TressCox Lawyers partner Allistair Little told SmartCompany Australian businesses can actually get away with such activity, but only if they go through the proper channels.
“You’d argue that while what you’re doing is prima facie anti-competitive, it’s still overall providing a genuine purpose.”