A federal appeals court in New York on Tuesday sided with regulators who said Apple was guilty of conspiring to drive up the price of e-books.
Calling Apple’s transgressions “the supreme evil of antitrust,” the U.S. Court of Appeals for the 2nd Circuit upheld, in a 2-to-1 decision, a ruling that Apple had conspired in 2010 with five major book publishers to fix e-book prices.
The publishers — Harper Collins, Penguin, Simon & Schuster, Hachette and Macmillan — all settled with the Justice Department, which had accused them and Apple of “horizontal price-fixing” with the aim of breaking online retailer Amazon’s hold on the e-book market. (Amazon founder and chief executive Jeffrey P. Bezos owns The Washington Post.)
Apple agreed last year to pay $450 million, mostly to consumers, if U.S. District Judge Denise Cote’s 2013 ruling in the class-action suit was upheld on appeal.
The Justice Department said it was “gratified” by the appellate decision.
“The decision confirms that it is unlawful for a company to knowingly participate in a price-fixing conspiracy, whatever its specific role in the conspiracy or reason for joining it,” Assistant Attorney General Bill Baer said in a statement. “Because Apple and the defendant publishers sought to eliminate price competition in the sale of e-books, consumers were forced to pay higher prices for many e-book titles.”
Apple, which can appeal the decision to the Supreme Court, said it is studying its options.
“Apple did not conspire to fix ebook pricing, and this ruling does nothing to change the facts,” Apple said in a statement. “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.”
But a majority of the three-judge appellate panel disagreed.
“By organizing a price fixing conspiracy, Apple found an easy path to opening its iBooks Store, but it did so by ensuring that market wide e-book prices would rise to a level that it, and the Publisher Defendants, had jointly agreed upon,” Judge Debra Ann Livingston wrote in the court’s decision.
Judge Dennis Jacobs dissented. He said the lower court had erred by not examining the competitive pressure Apple and the publishers faced.
Apple’s conduct “was unambiguously and overwhelmingly procompetitive,” Jacobs wrote. “Apple was a major potential competitor in a market dominated by a 90 percent monopoly, and was justifiably unwilling to enter a market on terms that would assure a loss on sales or exact a toll on its reputation.”