Last year, we reported that the United States Department of Justice (DoJ) was going ahead with lawsuits against Apple and five major publishers – Hachette, HarperCollins, Macmillan, Simon & Schuster and Penguin – over alleged e-book price fixing. Essentially, the DoJ was investigating whether Apple’s deals with the publishers amounted to price-rigging, in the wake of the iPad’s launch back in 2010.
Today’s news comes a little over a month since the Apple trial started, and less than two months after Penguin became the last publisher to settle the case, paying $75 million in the process.
This was the single biggest payout from the five publishers implicated in the case, and followed Simon & Schuster, Hachette Book Group and HarperCollins, which had previously agreed to settle for around the $70m mark, then MacMillan also agreed to pay $12m earlier this year.
The road to ruin
US District Judge Denise Cote said that the decision was a victory for the US government and the 33 states that had brought the case to trial, though Apple had previously argued that the suit was flawed, saying the pricing spurred competition and e-reader advances.
The crux of the issue, according to the US Department of Justice (DoJ), was that Apple had conspired with the publishers in question to try and oust Amazon from its pole-position in the online e-book market, by ensuring books remained above Amazon’s typically lower prices. Essentially, it was about the publishers – not the retailer (e.g. Amazon) – being able to set prices. By having five of the six major publishers agree to this, this went a long way towards stifling competition.
Cote added that prices for some e-books rose to $12.99 or $14.99 in the iBookstore, when Amazon had been selling them 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,” she said. “Without Apple’s orchestration of this conspiracy, it would not have succeeded as it did in the spring of 2010.”
This, of course, has ramifications for Apple’s entire model given that it sells much more than e-books – we’re talking movies, music and games too. Following today’s verdict, Apple may find its operations across the media realm fall under greater scrutiny; and for now at least, it will have to revise the way it prices e-books given that the 5 publishers have been ordered to cease the agency pricing model for at least two years.
Apple has also confirmed it plans to appeal, with AllThingsDigital’s Peter Kafka getting this quote from Apple spokesman Tom Neumayr:
“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.”
A separate trial for damages will be scheduled for later.
Feature Image Credit – DatenRATTE/Flickr