A federal judge has ruled that Apple is guilty of violating US antitrust law by “playing a central role” in a “conspiracy” to artificially and illegally raise the price of ebooks to harm competitors and consumers. A future trial will determine damages.
“The plaintiffs have shown that the publisher defendants conspired with each other to eliminate retail price competition in order to raise ebook prices, and that Apple played a central role in facilitating and executing that conspiracy,” US District Judge Denise Cote declared. “Without Apple's orchestration of this conspiracy, it would not have succeeded as it did in the spring of 2010.”
The ruling is a victory for the US Department of Justice (DOJ), which brought the suit, but also for booksellers and consumers, who saw the average price of ebooks suddenly jump from $9.99 to $12.99 to $14.99 when Apple launched its iBookstore in 2010. The reason for the price jump? Apple secretly conspired with the world’s biggest book publishers to stick it to the market leader, Amazon. But with Amazon still the dominant player in ebooks, the real victims are consumers, who artificially paid up to 50 percent more per book thanks to Apple’s plan to quickly gain ground in a new market.
When Apple entered the ebook market in early 2010, I noted that the result would be artificially higher prices for consumers, most chillingly that those higher prices would be true even for those who didn’t use Apple products or services. It took over a year, but the DOJ finally sued Apple and the six biggest book publishers in 2012, accusing the firms of conspiring in an Apple-orchestrated plot to artificially raise the price of ebooks and harm consumers. Most of the publishers immediately settled with the DOJ, and even Apple settled in a very similar case in the European Union (EU). But the firm decided to fight the US government.
That was ill-advised. This week’s ruling closely mirrors the claims in the original charge and even uses some of the same language, and the evidence was overwhelming. Apple, it emerged, behaved like a gangland thug, according to a “preponderance of evidence,” conspiring to restrain trade. And it didn’t just participate in the conspiracy, it orchestrated it, and the judge said the firm will now be held liable.
“Through their conspiracy, [Apple] forced Amazon (and other resellers) to relinquish pricing authority and they raised retail ebook prices,” Judge Cote wrote in the ruling. “Those higher prices were not the result of regular market forces but of a scheme in which Apple was a full participant.”