The verdict is in: Judge says Apple conspired to raise eBook pricing, calls for damages trial

Reports are just emerging that the Judge in the Apple eBook pricing case has reached a verdict, and it's not the one that Apple would want to hear. Judge Denise Cote has ruled that Apple did conspire to raise the prices of eBooks, and has called for a damages trial according to Reuters:

"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.

Amazon at that point was the major player in the eBook market, but the U.S. Department of Justice claims that Apple and some of the leading publishers conspired together in a move to try and undercut that dominance. Since the verdict, Apple spokesperson Tom Neumayr has confirmed to AllthingsD that they intend to appeal the decision:

"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 and we will appeal the judge's decision."

There's a clear case to both sides of the argument, though what happens next only time will tell. What's your take on all this? Do you think it's a fair verdict, or is Apple absolutely right to appeal?

Source: Reuters, AllthingsD

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Richard Devine

Senior Editor at iMore, part time racing driver, full time British guy

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The verdict is in: Judge says Apple conspired to raise eBook pricing, calls for damages trial


This is a big loss for the book industry and the public. Amazon getting a virtual monopoly on book pricing with anyone who tries to fairly compete against them getting hammered by the US government means less choice and higher prices for books and ebooks.

Still, you aren't allowed to break the law because someone else is allegedly doing so to compete with them. No way around that.

Apple pretty clearly screwed the pooch here and the proof is in the pudding. eBook prices went up, not down. If Apple's entry into the ebook market had truly created more competition, it would have sent prices lower.
This case is a loss for Apple and the publishers, but it's a win for consumers.

The thing there is did the prices go up before or after the publishers were harassed into not competing with Amazon and trying to look like they weren't working with Apple?

eBook prices went up as a result of Apple entering the market. Apple proposed a pricing structure that would result in higher profits for Apple and publishers (but not authors, by the way) and higher prices to consumers.
Apple is a smart company run by smart people, but the publishers conspired monopolistically on this (and have acceded that point) and Apple was an instrumental party to those negotiations. They should have taken their rap on the knuckles rather than dragging this out costing themselves and taxpayers more money.

Prices went up as soon as Apple entered the market. Publishers where scared of Amazon and even more scared that Amazon was pushing the prices of eBooks down. They wanted to keep the price of eBooks on Par with printed books. The publishers worked with Apple to counter Amazon and the low prices of eBooks.

What's worse is this deal did it's damage for the small retailers. They are all gone now, before Apple entered there where plenty to choose from. The deal that Apple made prevented any form of price reduction on eBooks which prevented small bookstores from competing.

District court disagrees with you. They wrote an opinion showing the ruling that apple "conspired with five book publishing companies to raise, fix, and stabalize" ebook prices violating the Sherman Act. A conspiracy is an agreement to engage in illegal behavior. What part of a conspiracy ruling is not breaking the law? And sorry, now this judge is on a political witch hunt? Please. She's weighing the facts and making a judgment. That's what judges do. What political agenda has this judge demonstrated? Seems to me if a ruling goes against Apple then it's summarily bad in some people's mind; that Apple can do no wrong. That's simply overly simplistic in my opinion. We should evaluate the facts and then come to an unbiased conclusion. I love my apple product but that doesn't mean they are free to break laws and it surely doesn't mean i'm not going admit when they do wrong. Now Apple will have their chance to appeal and maybe they will prevail time will tell but right now i see no evidence of a political witch hunt.

I suppose a victory to the public would be Apple get in league with publishers, raise prices, replace Amazon and make everybody pay more for books. Yay for Apple and Big Book!

Please do a mental exercise, replace "Apple" with "Microsoft" and see how you feel about the matter.

This trial reeked of anti-Apple (or perhaps it would be better to say pro-Amazon) bias from the outset. The judge even said before proceedings began that she believed Apple was at fault. Since Judge Cote said this, I'm sure it's not technically illegal, but it certainly brings her objectivity into question that she seemed already to have made up her mind before the trial even began. Whatever happened to innocent until proven guilty?

The fact of the matter is that Amazon had an ironclad monopoly on the ebook market before Apple entered, and it is still the biggest player by far. Apple introduced competition into a market that had virtually none, so it strains credulity that this judge (and the DOJ) have found them in violation of antitrust law.

This is rich. Amazon practised lower prices, Apple cospired to raise prices and people are upset because Apple lost? Just replace "Apple" with "Microsoft" and see how you feel about the subject.

Amazon's lower prices are unsustainable. They exist only to drive other ebook vendors out of the market so Amazon can charge more and rake in all the profits. And guess's already happening. Check out the July 4th New York Times story "As Competition Wanes, Amazon Cuts Back Discounts".

And the solution to that is for Apple to lead a collusion to raise prices, so they can push Amazon out and have their own monopoly with higher prices? I fail to see the logic.

"Another company’s alleged violation of antitrust laws is not an excuse for engaging in your own violations of law."

I'm not a fan of the Amazon monopoly either, but there was collusion between Apple and other publishers. The reasons are immaterial.

What evidence do you have of collusion? If there was any collusion, Apple was not involved. The Publishers? Sure, they could have used the fact that Apple said "If any other eBook store sells for less, we will sell for that. You, the publishers, set the price, but we think the ceiling (not basement) is $12.99/$14.99"

Collusion this does not make. Here is what will happen if this stands. Prices? Will not go down. Eventually, they will go up.

Oh, and we will be back to waiting for new releases to come to eBooks.

Someone motivated needs to start one of those online petitions, but make it an online pledge. That you will not buy any book, hard copy or digital, from any publisher who begins holding the digital release back.

It amazes me, still. Digital is here to stay. At first, the music industry didn't get it. Apple showed them the way.

The Movie industry, for the most part, gets it. They still want to produce physical copies, so they give us the digital download for iTunes free.

Magazines, also, for the most part, get it. I get SI and EW. Subscribe to the print version for like $10 a year and get the digital version free.

Books, not there yet, though they were on their way, again, with Apple (and similar) help.

This is not a win for consumers.

I have purchased 47 non free books from the iBookstore. What am I going to get out of this? $5?

And how much of my tax money was spent on this pre-determined case?

I am not saying that Apple is above the law. I just see zero evidence that they did anything wrong in this case.

" I just see zero evidence that they did anything wrong in this case."
Judge Cote, who saw all of the evidence and has a far superior knowledge of law to yours, disagrees.
Every company screws up from time to time. Accept it and move on.

Fair point that she saw all the evidence. And, granted, based on me commenting here, you can assume you know my level of knowledge of the law, but you don't know for sure, so that is a bit presumptuous on your part, no? Perhaps I have passed the Bar in the Commonwealth. You have no way of knowing.

Now, I will give you, I haven't actually passed or sat for the bar, but at one point was in pre law, before I let my technology love/passion move me to IT.

Then again, before she actually saw the evidence, she, too, had made a decision.

Perhaps you will be happier if I rephrase...

"EDIT: Based on the evidence that has been made publicly available, I just see zero evidence that..."

As far as screwing up, I agree. Apple has, on many occasions, done so. I don't expect perfection. I am just not convinced that Apple was the ring leader in this particular situation. I think it is far more likely that the publishers used Apple's rules to stop the direction Amazon was heading. Doesn't mean Apple did anything wrong, does it?

His assumption that you know very little of law is more than fair. You are on a messageboard for apple products. I doubt you will find many lawyers/judges who have the knowledge to surpass this judge's knowledge of federal law spending their time at imore.

LOL about the pre law bullshit, did you stay at a Holiday Inn Express as well? Probably flunked/couldn't hack it/partied your way out of pre law if you even got past the generic courses before you ended up at ITT Tech.

WOW! So glad I got this response. I knew I should have started my last reply with something like " And, granted, based on me commenting here, you can assume you know my level of knowledge of the law"

Thanks for making me reevaluate my life! Appreciate it.

My assumption was based not just on the post being on a tech site, but also because often (though not always) someone with specialized knowledge of a field will point out that knowledge quickly. "Speaking as a lawyer, this case..." "As an architect, I can tell you this building..." "I'm a commercial pilot, and in my experience this plane...". It's an assumption, but a pretty safe one.

And really, is it necessary to take a jab at the guy? A year or two of pre-law doesn't count for much, but there are lots of reasons to get out of pre-law, I would say many of them speak favorably of a person as opposed to unfavorably.

" I just see zero evidence..."
I'd suggest you read the case.

Page 26 starts a discussion of Apple's meetings with publisher regarding raising and stabilizing the price of ebooks. This section is detailing basic parts of the the price fixing.

Page 104 discusses the legal standard, Section 1 of the Sherman Act and the standards for analyzing a violation of the Section 1.

Page 113 begins the Analysis of the Evidence section where the standard of review under the Sherman Act is applied. By the way on appeal this question of law is likely what will have to be argued. That is that the standard was applied wrong or the wrong standard was used. But that is down the road.

To say "there is zero evidence" is simply willful blindness to the arguments presented. Evidence was clearly presented to the Judge and evidence is detailed in this opinion.

That article is about print books, it's not relevant. It's like comparing the cost of high speed internet service to the cost to mail a letter.

Yes, it is about print books; but that doesn't mean it won't happen with ebooks. Amazon sells a lot of Kindle content at a loss to spur sales of Kindles, but there does come a point where you have to actually make a profit to sustain a business.

Digital products are so completely different from physical products, the comparison really falls apart quickly, it's a completely different supply and distribution chain. Look at the potential of something like Kickstarter and what it has done to the independent comics industry. Just ask anyone who has tried to get themselves published in bound format versus digital. They're both books, but even sayign they're apples and oranges gives them too much similarity, it's more like apples and fire engines, they're both red (pardon the pun) but that's all they have in common.

Digital products (i.e. audio, video, literature) is not all that different. Its all media but without being tied to a physical medium you can touch. Some of the cost of these products usually include things like the medium they are on, shipping, storage, etc. In this digital world the only thing that can really apply is storage which is still less that all the other costs combined. So at this point we should be paying less but still get the same quality content which we are not.

There is no law against raising prices. They can't collude with others to raise prices. For example Exxon can decide to raise it's oil prices to $10 a gallon. But people will just go buy gas at a nother station. What Exxon can't do is meet with the other oil companies then enter into agreements to all raise the price of gas to $10.

OPEC isn't a company working under US Antitrust law, it's an oil cartel of several member countries. OPEC also doesn't directly set gasoline prices. They set crude oil prices and supply. Not the same thing.

This is good news, these laws where made to protect the consumer and competing business. Unfortunately it will not bring back the business that this deal destroyed(Fictionwise/eBookWise/BooksOnBoard/etc..).

Sadly the publishers got of easy. While under the guise of "Fair Competition" we all knew it wasn't. The Publishers achieved their goal and kept the prices of eBooks high at the cost of smaller retailers.

The main point is was Apple (in collusion with the biggest publishers) trying to force Amazon to move to the agency model? Evidence points that way. The "most favored nation" clause doesn't help nor does Jobs' emails.

I see nothing wrong with signing contracts with each publisher using the agency model. Amazon can compete with that. But when you start including MFN (most favored nation) clauses that allows Apple to sell at the lowest cost that ebooks would be sold for in ANY store...

This means of course that publishers couldn't keep doing business with Amazon the traditional way because it wouldn't make sense for the publishers. Amazon and BN and others would have to move to the Apple agency model (that alone speaks volumes).

It's important to note though that MFN clauses aren't illegal. Apple and others have used them before. But Apple here is also setting price ceilings and what not. There's evidence that Apple didn't negotiate separately with each but moreso as a group at times. Likely, it's what Apple had to do with the music and video publishers as well.

With Amazon in more control of the distribution of ebooks, they will at some point dictate to the publishers the wholesale price they are willing to pay. With no other outlet as large or well known as Amazon, the publishers will have to lower their prices or risk losing a sales outlet. This will lower royalties to authors and make them less able to produce books.
Walmart is known for pressuring suppliers to cut prices mercilessly even if the suppliers end up going out of business. Amazon is now in a similar position over the publishers.

Publishers can't skin the author cat much more than they already have. What you'll find instead is more authors moving to smaller or self-publishing options where they can take a larger cut of the book price. The large publishing houses used to be able to leverage authors because of their production and distribution networks. With digital books, publishers are going to have to change their tactics or find authors jumping ship.

Finally apple got it just desert. For trying to bully there way in to a new market that they didn't dominate it must of drove them crazy to know that they were not the big dogs so they tried there usual bulling tactic but it backfired on them thank god we got justice and maybe apple will learn you can't
just bully you have to play nice.

Nobody has thought that maybe, somewhere in the back of their head...raising prices on eBooks are a way to KEEP BRICK AND MORTAR BOOK STORES IN BUSINESS?

nope? didn't think so.

If its cheaper to buy the physical book, more people will go to the stores-keeping them open and keeping workers EMPLOYED. There will still be the strong group who will only buy things digitally, and who don't mind paying a premium for the convenience of being able to click an icon and get their book within seconds.

sure, its a "we want more money" play-but nobody ever thinks of little things like that in the grand scheme of things.

Oh yeah, I'm sure that's what Apple thought, "let's raise prices so we can sell less and make someone else profit."

Dear sir, if brick and mortar stores cannot compete with digital they are doomed to extinction, making customers artificially pay more is not going to save anybody and will hurt far more people than it will help. The market is always evolving and busineses need to evolve as well. It is cruel but inevitable.

Keeping brick and mortar book stores viable is not "the grand scheme of things." The grand scheme of things is in general consumers are damaged by price fixing. If oils is fixed high everything we by from food to shirts shipped on a truck go up in price. If utility companies fix prices we pay through the nose for home heating, electricity, etc. Price fixing eliminates competition. Take the sprint softbank merger. One reason people want that to go through is because one more competitive player in the market will place downward pressure on Verizon and AT&T to lower prices, provide better services in order to win customers and in the end consumers benefit from that. But hypothetically if we allow price fixing all 3 could simply set a take it or leave it price and never alter their business. The big picture is that the Sherman Act is their to protect the interest of the customer as a whole. It's to protect a system that is supposed to promote competition. And the reality is you need such a system because without it the economy would stagnate and die from overseas competitors making better products or offering better services. The big picture isn't dying brick and mortar book stores. The act doesn't prevent price fixing, unless its to save brick and mortar book stores. The big picture is the protecting economic growth; protecting consumer not simply for ebooks, or protecting brick and mortar stores but ensuring that the country has a system that fosters creativity, innovation, competition, for the benefit of the consumers.