U.S. District Judge Denise Cote ruled Wednesday that Apple Inc. conspired with five major publishers to raise the price of ebooks. While Lagardere SCA's Hachette Book Group Inc and Macmillan, News Corp's HarperCollins Publishers LLC, Pearson Plc's Penguin Group (USA) Inc, and CBS Corp's Simon & Schuster Inc. settled with the U.S. government and the states, admitting participation in the conspiracy, Apple went to trial. Cote ultimately ruled that “Apple not only willingly joined the conspiracy, but also forcefully facilitated it. This price-fixing conspiracy would not have succeeded without the active facilitation and encouragement of Apple." Cote deserves respect for confronting the technological superpower and insisting that it is not above the law, in spite of its privileged status in American culture.
Apple’s attempt at justification failed, consisting of poor arguments and shameless finger-pointing. It claimed that Amazon — the foremost retailer of ebooks — is a monopoly, and that it was acting in the best interest of the customers. Apple claimed that “it never intended to conspire with the publishers, and the publishers were the only entities with the power to raise prices.” This line of reasoning is insulting at best. Amazon charged customers only $9.99 for majority of ebooks while Apple wanted to raise prices so it could reap a whopping 30% of profits. The five book companies who collaborated with Apple claimed they were enticed by the promise of an “agency model” where publishers could set their own prices. Many publishers thought Amazon’s customer-friendly pricing policy was taking away from their profits. These companies had unsuccessfully attempted to raise ebook prices in a similar fashion with Amazon in the past, and Apple seized the opportunity as the timing coincided with its release of the iPad. As a result of these negotiations, Amazon was forced to raise ebook prices to $12.99-$14.99 in order to appease publishers. However, once these five major publishers settled with the Department of Justice, prices have largely dropped back down to $9.99 per ebook.
Succinctly put, "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 said. Apple told publishers it needed a “critical mass” of publishers on board for the plan to work, including a clause ensuring that publishers would agree to match lowest prices offered elsewhere (Amazon included). Granted, this in of itself is not illegal, but Cote ruled that Apple used these agreements, along with other tactics, to "effect an unreasonable restraint of trade," which is illegal under anti-trust laws. Reparations will be determined at a later date.
Apple was shocked by the ruling, having no immediate responses when requested to comment (they do plan to appeal the decision, however). Amidst all the recent examples of corporate favoritism run amok (Monsanto, anybody?), this ruling stands out as a beacon of hope for the American public. Bill Baer, assistant U.S. attorney general and head of the Justice Department’s antitrust division, rightly called the ruling "a victory for millions of consumers who choose to read books electronically."