Judge rules Apple conspired to raise e-book prices
A New York federal judge ruled Wednesday that Apple Inc. conspired with several publishing companies to raise the prices of e-books, but the technology giant announced it would appeal the decision.
The ruling by US District Judge Denise Cote marked an important victory for Amazon.com, which once held a 90 percent market share by selling e-books at $9.99, a price many publishers considered too low.
The publishers charged in the case alongside Apple - Simon & Schuster, Hachette Book Group, Penguin Group, Macmillan and News HarperCollins - all settled with the US Department of Justice, which brought the anti-trust suit last year.
"Apple not only willingly joined the conspiracy, but also forcefully facilitated it," Cote said in her decision. "This price-fixing conspiracy would not have succeeded without the active facilitation and encouragement of Apple."
Immediately after the ruling was handed down, the California-based technology giant announced plans to appeal.
"Apple did not conspire to fix e-book pricing, and we will continue to fight against these false accusations," company spokesman Tom Neumayr said.
The Justice Department alleged that publishers colluded with Apple to artificially drive up the price of e-books and, in so doing, prevented Amazon from continuing to sell e-books for $9.99.
Amazon had adopted a strategy in 2007 of buying books wholesale and selling them at a loss in a bid to attract consumers to its Kindle e-reader, becoming the undisputed market leader in the process, but publishers feared the Seattle-based company's low prices would trigger a drop in the price of print books.
Apple, as it prepared for the 2010 launch of the iPad and its iBookstore, joined with publishers in a bid to limit competition in the sale of e-books, according to the suit.
Under the so-called "agency agreements" Apple entered into with publishers, the latter sets the prices of the books while the former takes a commission as the reseller.
Amazon executives, meanwhile, testified in court that the company was forced to largely abandon its $9.99 benchmark after being given an ultimatum by the publishers: either switch to the agency model or lose timely access to new books.
The pact between Apple and the publishers achieved the desired effect because e-book editions of best sellers began to be sold across-the-board for prices ranging from $12.99 to $16.99.
But once the five publishers settled with the Justice Department, e-book prices began drifting downward to earlier levels.
The ruling by US District Judge Denise Cote marked an important victory for Amazon.com, which once held a 90 percent market share by selling e-books at $9.99, a price many publishers considered too low.
The publishers charged in the case alongside Apple - Simon & Schuster, Hachette Book Group, Penguin Group, Macmillan and News HarperCollins - all settled with the US Department of Justice, which brought the anti-trust suit last year.
"Apple not only willingly joined the conspiracy, but also forcefully facilitated it," Cote said in her decision. "This price-fixing conspiracy would not have succeeded without the active facilitation and encouragement of Apple."
Immediately after the ruling was handed down, the California-based technology giant announced plans to appeal.
"Apple did not conspire to fix e-book pricing, and we will continue to fight against these false accusations," company spokesman Tom Neumayr said.
The Justice Department alleged that publishers colluded with Apple to artificially drive up the price of e-books and, in so doing, prevented Amazon from continuing to sell e-books for $9.99.
Amazon had adopted a strategy in 2007 of buying books wholesale and selling them at a loss in a bid to attract consumers to its Kindle e-reader, becoming the undisputed market leader in the process, but publishers feared the Seattle-based company's low prices would trigger a drop in the price of print books.
Apple, as it prepared for the 2010 launch of the iPad and its iBookstore, joined with publishers in a bid to limit competition in the sale of e-books, according to the suit.
Under the so-called "agency agreements" Apple entered into with publishers, the latter sets the prices of the books while the former takes a commission as the reseller.
Amazon executives, meanwhile, testified in court that the company was forced to largely abandon its $9.99 benchmark after being given an ultimatum by the publishers: either switch to the agency model or lose timely access to new books.
The pact between Apple and the publishers achieved the desired effect because e-book editions of best sellers began to be sold across-the-board for prices ranging from $12.99 to $16.99.
But once the five publishers settled with the Justice Department, e-book prices began drifting downward to earlier levels.