Apple Guilty of Collusion on E-book Pricing

Apple-storeIn a U.S. District Court ruling this morning, U.S. Department of Justice charges against Apple Inc. (NASDAQ: AAPL) for colluding to fix prices for e-books with several publishers were upheld. Apple. The charges stemmed from an agreement between Apple and the publishers to raise the prices for e-books above the prices charged by Amazon.com Inc. (NASDAQ: AMZN).

All the publishers eventually settled with the Justice Department before the case went to trial, but Apple refused a settlement. The company argued that it had an "agency model," under which Apple received 30% of e-book sales based on prices set by the publishers. Under the "wholesale model" used by Amazon, publishers had no control over the price that Amazon charged for e-books.

The publishers hated the wholesale model because Amazon charged just $9.99 for an e-book. In the deal with Apple, publishers set the retail price at as much as $14.99.

According to The Wall Street Journal, the judge said:

The [Justice Department and several state attorneys general] 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. Without Apple's orchestration of this conspiracy, it would not have succeeded as it did in the Spring of 2010.

The trial lasted for most of June and included testimony from many top Apple executives. A trial on damages is likely to follow, but Apple may choose to appeal today's ruling.


Filed under: Technology Tagged: AAPL, AMZN

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