A JUDGE has found Apple guilty of a price-fixing conspiracy for electronic books, saying the company “conspired to restrain trade” with publishers to boost the price of ebooks.
Judge Denise Cote, who presided over a bench trial in New York, said in her opinion that “Apple is liable here for facilitating and encouraging the Publisher Defendants’ collective, illegal restraint of trade”. She ordered a new hearing to determine damages.
Each of the five publishers originally named in the US government’s civil lawsuit settled the case, leaving Apple to stand trial alone.
Apple’s chief executive Tim Cook had said ahead of the trial that the California firm would not settle, claiming it had done nothing wrong but was merely pursuing normal business practices.
The trial focussed on a six-week period in late 2009 and early 2010 during which Apple negotiated contracts with publishers ahead of its iPad launch and proposed a new and more profitable business model.
At the time, publishers were furious at the state of the market dominated by Amazon, which sold most bestsellers for just $US9.99 ($10.90).
Amazon held “wholesale” contracts with publishers in which it set prices. Apple’s contracts shifted to an “agency” model where publishers set the price in exchange for a 30 per cent commission to Apple.
Prior to Apple’s entry, the publishers – all of whom have settled in the case – would complain about Amazon’s $US9.99 price at private dinners in fancy New York restaurants, but each feared taking on the internet giant alone.
Among the publishers settling the case, the largest was with Penguin for $US75 million, while a settlement with Hachette, Harper Collins and Simon & Schuster created a $US69 million fund for refunds to consumers. Macmillan settled for $US26 million.
Harper Collins is owned by News Corporation, which also owns the parent company of this publication.