feApple Is On The Hook For $450M After Losing Federal Appeal In E-Book Price-Fixing Case

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Though Apple’s alleged co-conspirators have long since settled and gone about the process of making good for the price-fixing they did not legally admit to committing, the elecronics company had held out in its fight to clear its name, taking the case to a federal appeals court late last year. It seems the electronics company will have to give up that battle, after the court upheld a 2013 decision that found Apple liable for conspiring with publishers to raise the price of e-books.

Apple is expected to pay more than $450 million — much of that to consumers by way of refunds, with the rest going toward fees and other fines, reports the Wall Street Journal.

Quick background for those unfamiliar: In 2012, the Dept. of Justice sued Apple and many of the nation’s largest book publishing companies for allegedly conspiring to set high prices on the e-book market. Part of Apple’s argument before the federal appeals court in December was that it was just trying to snap the stranglehold Amazon had on the e-book market, but that apparently didn’t convince the court.

In a 2-1 ruling by the Second U.S. Circuit Court of Appeals in Manhattan [PDF], the judges sided with the lower court’s decision to hold Apple to the November agreement with private plaintiffs and 33 states that joined the Justice Department’s 2012 lawsuit.

“We conclude that the district court correctly decided that Apple orchestrated a conspiracy among the publishers to raise e-book prices,” wrote Second Circuit Judge Debra Ann Livingston. The conspiracy “unreasonably restrained trade” in violation of the Sherman Act, the federal antitrust law, the judge wrote.

Prosecutors had argued that Apple and publishers had ganged up to fight Amazon’s aggressive discounts by agreeing to use an agency model of pricing, wherein the publisher sets the price of books and the retailer gets a cut. Under the alleged agreement, if another retailer was selling an e-book for a lower price, the publisher would have to match that price in Apple’s store.

E-mails from Apple executives, including company co-founder Steve Jobs, were used against the iPhone maker in court to demonstrate that the goal of agency pricing was to increase what people paid for e-books.

“Throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99,” wrote Jobs in one message to News Corp, the parent company of HarperCollins.

The publishers had the leverage they’d need to fight Amazon with this new model, Justice Department lawyers said, and prices on many e-books increased immediately. Apple’s legal team had said the company didn’t realize it was leading the publishers’ charge against Amazon.

But the Second Circuit majority said evidence showed Apple knew exactly what it was doing.

“Apple understood that its proposed contracts were attractive to the publisher defendants only if they collectively shifted their relationships with Amazon to an agency model — which Apple knew would result in consumers facing higher e-book prices,” Judge Livingston wrote in a decision joined by Judge Raymond J. Lohier Jr.

Apple had no immediate comment to the WSJ. It can now either ask the Second Circuit to hear the case or ask the U.S. Supreme Court to take it up.

by Mary Beth Quirk via Consumerist