A federal
judge has ruled that Apple Inc conspired with five major publishers to raise
e-book prices. U. S. District judge Denise Cote in Manhattan found evidence
that Apple violated federal antitrust law by playing an integral role in
conspiracy with publishers to eliminate retail price competition.
Apple in
its bid to reduce Amazon’s dominance in the e-book market (which controlled
about 90% of the e-book market at a point in time few years ago), Apple
connived with publishers by allowing publishers to choose a higher price for
their e-books. The publishers were to pay 30% commission on sales made to Apple.
“Apple
chose to join forces with the publisher defendants to raise e-book prices and
equipped them with the means to do so,” Cote said in his decision. “Without
Apple’s orchestration of this conspiracy, it would not have succeeded as it
did.”
This arrangement
saw books that were normally sold for $9.99 rise to about $12.99 to $14.99.
This brought gains to the publishers and Apple but was a loss to consumers who
were paying higher prices for the same book.
Amazon in a
bid to keep up with the competition started having similar arrangements with
publishers and this increased the price of e-books by 18%. Amazon’s dominance
has since been reduced to 65% in the e-book market with Barnes and Noble Inc
now holding a respectable 20% of the market.
Apple opened
its iBookStore in 2010 to have a share of the e-book industry. Apple have
however took a stance that they cannot be held to ransom alone for this
arrangement since other companies like Amazon and Google has since adopted the
arrangement.
A later
date of August 9 has been chosen to discuss the remedies, trials and possible
damages to be accounted for by Apple. Apple have maintained the stance that
they did nothing wrong. “Apple did not conspire to fix e-book pricing,”
spokesman Tom Neumayr said. “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.
We’ve done nothing wrong.”
The main
thing that betrayed Apple in this case was emails sent to News Corp’s executive
James Mudoch by late Apple co-founder Steve Jobs which government claims reflected
Jobs’ desire to boost prices and “create a real mainstream e-books market at
$12.99 and $14.99.”
Apple has
also stated their plans to appeal the decision. Amazon in its bid to promote
its book device kindle has been trying to reduce the prices of e-books by
buying at wholesale and this ruling may have come at a good time for Jeff Bezos
and his company.
Apple has been
in a lot of troubles recently and this year to say the least has not been going
as it would like it to. Importation of some of it devices were banned recentlyafter it lost a patent battle against Samsung not to talk of share falls.
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Apple found guilty of inflating e-book prices