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Apple Conspired to Fix E-Book Prices, Judge Rules
New York Law Journal
Apple violated antitrust laws when it orchestrated a conspiracy to fix e-book prices with five major publishers, Southern District Judge Denise Cote ruled this morning.
Following a June bench trial in which Cote heard testimony about a hastily assembled plan by Apple to plunge into the e-book market by combining with publishers fed up with the $9.99 price charged by Amazon, the judge said today in United States v. Apple, 12 Civ. 2826, that "the evidence is overwhelming that Apple knew of the unlawful aims of the conspiracy and joined the conspiracy with the specific intent to help it succeed."
The decision, which Apple said it would challenge at the U.S. Court of Appeals for the Second Circuit, sets up a hearing on injunctive relief and damages, which is expected to include the government's request for a multi-year ban on most-favored-nation clauses— whereby publishers were allowed to match a competitor's decision to drop prices but Apple still retained its 30 percent cut.
Cotes's ruling came in an action brought by the U.S. Justice Department's Antitrust Division and State of Texas v. Penguin Group (USA), 12 Civ. 3394, brought by 33 states and U.S. territories.
In addition to Penguin, the other publishers, all of whom settled in the year running up to trial, are Hachette, HarperCollins, Macmillan and Simon & Schuster.
In a statement, Assistant Attorney General William Baer called the decision "a victory for millions of consumers who choose to read books electronically."
"Apple did not conspire to fix e-book pricing and we will continue to fight against these false accusations," said an Apple spokesman.
"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," the spokesman said. "We've done nothing wrong and we will appeal the judge's decision."
Apple's lead lawyer, Orin Snyder, of Gibson Dunn & Crtucher, could not immediately be reached for comment.
This article originally appeared in the New York Law Journal.