Apple is guilty of violating antitrust laws by colluding with several major publishers to fix prices on e-books sold through iTunes, a federal judge has ruled. Apple plans to appeal the verdict.
Judge Denise Cote of U.S. District Court in the Southern District of New York ruled that Apple colluded with publishers Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster in violation of Section 1 of the Sherman Antitrust Act, a landmark federal statute passed by Congress in 1890.
The law, which prohibits certain business activities that federal government regulators deem to be anti-competitive, is still relevant in the digital goods era.
"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 wrote in her 160-page ruling issued Wednesday. "Without Apple's orchestration of this conspiracy, it would not have succeeded as it did in the spring of 2010."
Apple's 'Illegal Actions'
U.S. Assistant Attorney General Bill Baer, who is in charge of the Department of Justice's Antitrust Division, said the ruling is a victory for millions of consumers who choose to read books electronically.
"As the department's litigation team established at trial, Apple executives hoped to ensure that its e-book business would be free from retail price competition, causing consumers throughout the country to pay higher prices for many e-books. The evidence showed that the prices of the conspiring publishers' e-books increased by an average of 18 percent as a result of the collusive effort led by Apple," Baer said.
"Companies cannot ignore the antitrust laws when they believe it is in their economic self-interest to do so. This decision by the court is a critical step in undoing the harm caused by Apple's illegal actions."
Apple Vows To Fight
Apple is not giving up without a fight. An Apple statement insisted the company did not conspire to fix e-book pricing, and Apple vowed to 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," Apple said. "We've done nothing wrong and we will appeal the judge's decision."
But the DOJ has already settled with some of Apple's co-conspirators. The
department reached settlements with three of the publishers -- Hachette, HarperCollins and Simon & Schuster -- in September 2012. The DOJ settled with Penguin in December 2012 and with Macmillan in February this year.
Under the settlements, each publisher was required to terminate agreements that prevented e-book retailers from lowering the prices at which they sell e-books to consumers, and to allow for retail price competition in renegotiated e-book distribution agreements.