A judge Wednesday found Apple guilty of a price-fixing conspiracy for electronic books, saying the company "conspired to restrain trade" with publishers to boost the price of ebooks.
The decision could reshape how books are sold on the Internet.
On April 11, 2012, the Department Of Justice filed a civil antitrust lawsuit in the U.S. District Court for the Southern District of New York against Apple and five book publishers (Hachette Book Group (USA), HarperCollins Publishers L.L.C., Holtzbrinck Publishers LLC, which does business as Macmillan, Penguin Group (USA) Inc. and Simon & Schuster Inc.) for conspiring to end e-book retailers' freedom to compete on price by taking control of pricing from e-book retailers and increasing the prices that consumers paid for e-books.
At the same time that it filed the lawsuit, the department reached settlements with three of the publishers - Hachette, HarperCollins and Simon & Schuster. The department also settled with Penguin on Dec. 18, 2012, and with Macmillan on Feb. 8, 2013. Under the settlements, each publisher was required to terminate agreements that prevented e-book retailers from lowering the prices at which they sell e-books to consumers and to allow for retail price competition in renegotiated e-book distribution agreements.
The department's trial against Apple, which was overseen by Judge Denise Cote, began on June 3, 2013. The trial lasted for three weeks, with closing arguments taking place on June 20, 2013.
Judge Denise Cote said in her opinion that "Apple is liable here for facilitating and encouraging the Publisher Defendants' collective, illegal restraint of trade." She ordered a new hearing to determine damages. The Judge added the conspiracy resulted in prices for some e-books rising to $12.99 or $14.99, when Amazon had sold for $9.99.
"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 said.
"Without Apple's orchestration of this conspiracy, it would not have succeeded as it did in the spring of 2010," she added.
Apple claims that it did not conspireto fix ebook pricing and plans to appeal the judge's decision.
"This result is a victory for millions of consumers who choose to read books electronically. After carefully weighing the evidence, the court agreed with the Justice Department and 33 state attorneys general that executives at the highest levels of Apple orchestrated a conspiracy with five major publishers - Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster - to raise e-book prices. Through today's court decision and previous settlements with five major publishers, consumers are again benefitting from retail price competition and paying less for their e-books," said Assistant Attorney General Bill Baer in charge of the Department of Justice's Antitrust Division.
"As the department's litigation team established at trial, Apple executives hoped to ensure that its e-book business would be free from retail price competition, causing consumers throughout the country to pay higher prices for many e-books. The evidence showed that the prices of the conspiring publishers' e-books increased by an average of 18 percent as a result of the collusive effort led by Apple."
The court has not yet scheduled a hearing to address the parties' proposed remedies.