2nd Circuit OKs verdict against Apple in $450M e-book price-fixing case
A divided federal appeals court Tuesday upheld a 2013 antitrust verdict against Apple Inc. It centers on the company’s participation in a price-fixing conspiracy concerning e-books, as Apple was promoting its new iPad in 2010.
Agreeing with a trial judge that the company conspired with publishers, the New York-based 2nd U.S. Circuit Court of Appeals by a 2-1 vote affirmed (PDF) the New York court’s finding of liability and an order requiring Apple to comply with the law.
The company contends that its agreements with publishers were legitimate competition. However, the 2nd Circuit majority opinion, which was written by Judge Debra Ann Livingston, said Apple orchestrated a horizontal scheme to raise prices that “unreasonably restrained trade” and violated the Sherman Act.
At the time, Amazon dominated the e-book market and sold e-books to consumers for as little as $9.99, even if the wholesale price the company was paying for them was higher, IDG News Service explains. Under an agency pricing model promoted by Apple, publishers were able to set their own prices but had to allow Apple to match lower prices at Amazon and other e-book sellers.
The result, the plaintiffs said, was to squeeze Amazon and encourage higher e-book prices. However, a dissent called the tactic legitimate.
“A further and pervasive error (by the district court and by my colleagues on this appeal) is the implicit assumption that competition should be genteel, lawyer-designed, and fair under sporting rules, and that antitrust law is offended by gloves-off competition,” wrote Judge Dennis Jacobs.
Under a settlement reached last year with 33 states that is contingent on Apple’s liability being upheld on appeal, the company must pay about $450 million or pursue a further appeal, according to Reuters and the Washington Post (reg. req.). Much or all of that amount is expected to be paid in restitution to e-book consumers.
It isn’t clear from current news coverage whether any additional payment will be made to the Department of Justice, which also participated in the case, and, if so, how much.
Five defendant publishers settled with the DOJ prior to trial, a DOJ press release explains. The DOJ’s separate antitrust suit was consolidated with the litigation brought by the 33 states prior to trial.
Apple said in a written statement that it is considering its options:
“Apple did not conspire to fix e-book pricing and this ruling does nothing to change the facts,” the company said. “We are disappointed the court does not recognize the innovation and choice the iBooks Store brought for consumers. While we want to put this behind us, the case is about principles and values. We know we did nothing wrong back in 2010 and are assessing next steps.”
Broadcasting & Cable, Fortune and the Wall Street Journal (sub. req.) also have stories.
Related coverage:
ABAJournal.com: “Apple OKs high-low settlement of as little as zero and as much as $400M in e-book price-fixing case”
See also:
ABAJournal.com: “2nd Circuit nixes Apple campaign to boot BigLaw partner as court-appointed monitor in e-book case”
