Apple, Inc. owns one of the largest media distributors in the world; iTunes. But ton Wednesday, a federal judge ruled that the company conspired with five major publishers to raise the retail prices of electronic books.
The shocking conspiracy was revealed when U.S. District Judge Denise Cote of Southern New York found “compelling evidence” that Apple violated federal antitrust laws by playing a “central role” in a scheme with the publishers to eliminate retail price competition and raise e-book prices.
Apple planned to undercut retail giant Amazon and its e-book dominance by raising some prices to 12.99 or 14.99 from the 9.99 that Amazon charged. Amazon once held a 90 percent market share.
In the 159-page decision, Cote said “Apple chose to join forces with the publishers’ defendants to raise e-book prices and equipped them with the means to do so.” She also added that without Apple’s involvement, this scheme could have never been orchestrated effectively.
Assistant Attorney General Bill Baer of the Justice Department released a statement, saying, “This result is a victory for millions of consumers who choose to read books electronically.” He also stated that the court decision is the first step in a long process to undo to harm caused by Apple’s price fixing scheme.
Apple released a statement, also in response to the ruling, that allegations against them are false and that they plan on appealing Judge Denise Cote’s decision.
Apple spokesman Tome Niamey said: “”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.”
Last year however, Apple settled a separate antitrust case over e-book pricing with the European Commission. They also admitted no wrongdoing in that case either.
Only Apple went to trial; the publishers agreed to pay more than $166 million combined to benefit consumers. The publishers included were Lagardere SCA’s Hachette Book Group, Inc., News Corp’s HarperCollins Publishers LLC, Pearson Plc’s Penguin Group (USA), Inc., CBS Corp’s Simon & Schuster, Inc. and Verlagsgruppe Georg von Holtzbrinck GmbH’s Macmillan.
Baer said that Cote’s decision, together with the settlements, have helped to reduce prices of e-books.
This decision has the potential to be a major blow to Apple, whose stock prices have never quite recovered to its Jobs-era highs. In Wednesday’s morning trading, Apple shares fell by 30 cents.
This piece originally appeared on the Benay Enterprises blog.