Apple played central role in e-book price fixing conspiracy: US federal judge

A US federal judge has faulted Apple Inc's strategy for selling electronic books on the internet, as it involved price rigging in collusion with five major publishers.

US district judge Denise Cote in Manhattan found "compelling evidence" that the iPhone maker violated federal antitrust law by playing a "central role" in conspiring with the publishers to eliminate retail price competition and raise e-book prices.

According to commentators, Apple would likely have to pay up substantial damages. They say the decision comes as a significant victory for the US Department of Justice and the 33 US states and territories that brought the civil antitrust case.

Meanwhile, the five publishers have already settled with the justice department.

Apple faced accusations of attempts at undercutting Amazon.com Inc's e-book dominance, which led to  e-book prices rising to $12.99 or $14.99 from the $9.99 charged by the online retailer. Amazon held a 90-per cent market share at one time.

"Apple chose to join forces with the publisher defendants to raise e-book prices and equipped them with the means to do so," Cote said in a 159-page decision. "Without Apple's orchestration of this conspiracy, it would not have succeeded as it did."

The decision had no element of surprise as Cote had indicated before the two-and-half week non-jury trial got underway on 3 June (See: Apple e-books trial opens)
that Apple's defences might not work. 

According to the court, Apple and the publishers started discussing in mid-December 2009 "their abhorrence of Amazon's pricing", with Apple suggesting increasing prices to $12.99 and $14.99.

During the talks, Apple said it wanted to announce the iBookstore at the 27 January 2010 launch of the iPad, but only on condition of an assurance that the company could make a profit.

"With a full appreciation of each other's interests, Apple and the publisher defendants agreed to work together to eliminate retail price competition in the e-book market and raise the price of e-books above $9.99," said Cote.

Executives at MacMillan and Hachette had been discussing ways to get Amazon to hike ebook prices as early as 2008. Unable to make much headway they started campaigning for increasing prices in newspapers and in private dinner meetings.

"On a fairly regular basis, roughly once a quarter, the CEOs of the publishers held dinners in the private dining rooms of New York restaurants, without counsel or assistants present, in order to discuss the common challenges they faced, including most prominently Amazon's pricing policies," said Cote.

In a statement after the ruling, Apple said, ''Apple did not conspire to fix ebook pricing and we will continue to fight against these 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.''