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Apple Conspired to Raise eBook Prices, Judge Rules

By Brett Snider, Esq. on July 10, 2013 | Last updated on March 21, 2019

Apple lost a major battle over eBooks on Wednesday, after a federal judge ruled that Apple violated antitrust law by conspiring with publishers to raise eBook prices.

The company behind such technological successes as the iPad and MacBook was found to have played a "central role" in an eBook price-fixing scheme, one that was designed to undercut the major online bookseller Amazon.com, reports Reuters.

How will this new ruling effect eBook sales on iTunes or Apple's business in general?

eBook Price-Fixing Suit

Claims of Apple's involvement in eBook price-fixing stem from 2010, when the federal lawsuit was first filed against Apple and five publishers including Penguin Group and Simon & Schuster. The companies were accused of conspiring to fix prices on eBooks to take down Amazon and its newly released Kindle eBook reader.

At one time, Amazon had a 90% share of the eBook market, largely because the company bought eBooks wholesale and sold them to consumers below cost, reports Reuters.

The Justice Department filed its lawsuit against Apple and these publishers in 2012, claiming that these conspiracy activities violated Section 1 of the Sherman Act.

Violated Antitrust Law

The Sherman Act and federal antitrust laws protect the healthy flow of a capitalistic market by prohibiting and punishing deals that serve to stifle trade and competition.

Justice Department lawyers claimed in their suit that Apple and the five publishers were using an agreement to keep eBook prices artificially high. They allegedly ceased to compete over retail prices and gave Apple a 30% kickback on eBook sales.

By creating this scheme to freeze out Amazon and remove competition between the conspiring eBook publishers, Apple was in violation of federal antitrust law, U.S. District Judge Denise Cote found.

Now What?

After the judge's ruling, Apple's shares on Nasdaq dropped $1.60 on Wednesday, reports Reuters. The computer giant still faces a trial to determine how much Apple will owe in damages.

Apple had previously refused to settle the case, even after the five conspiring publishers signed on to a settlement.

Still sticking to its guns, a spokesman for Apple said the company will "continue to fight these false accusations" and will appeal the court's decision, reports The Associated Press.

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