This morning, following a two-and-a-half week bench trial, Apple was found to be in violation of the Sherman Antitrust Act for colluding with publishers to raise prices on e-books. The decision, rendered by U.S. District Judge Denise Cote in Manhattan, is a sound victory for the U.S. Department of Justice and other plaintiffs that brought suit against Apple and five publishing companies last year.
The trial and subsequent ruling stems from allegations that Apple, in collaboration with five publishing companies, engaged in collusive activity to raise e-book prices, thereby removing a competitive price advantage at the time held by Amazon.com. Prior to Apple initiating the collusive activity with the publishing companies back in 2009, Amazon was pricing e-books at $9.99. Apple and the publishing companies wished to charge between $12.99 and $14.99 per e-book; Apple wanted a price increase in order to undercut Amazon’s competitive price advantage and increase marketshare for its then-debuted iPad tablet device, and the publishing companies wanted higher prices to generate more profits per e-book sold.
Apple and the publishers were ultimately successful at forcing Amazon to raise its prices on e-books, which the company eventually did to respond to losing business and profits to Apple. This course of events eventually led to the broad lawsuit against Apple and the publishers; all five publishers settled with the U.S. government for a total sum of $166 million, whereas Apple decided to go to trial.
With a ruling against Apple now in hand, the plaintiffs can now seek financial damages as well as injunctions to prevent similar collusive activity in the future by Apple. Justice Cote has ordered a trial to decide damages.
The case is U.S. v. Apple Inc et al, U.S. District Court, Southern District of New York, No. 12-02826.