Apple Barred from E-book Price-Fixing Agreements for Five Years

An injunction has been filed in the U.S. Department of Justice’s case against the world’s leading smartphone and tablet manufacturer and e-content provider. The injunction is a victory for the Justice Department, who allege that Apple engaged in a pervasive price-fixing scheme with e-book publishers.

“The court found that Apple’s illegal conduct deprived consumers of the benefits of e-book price competition and forced them to pay substantially higher prices,” said Bill Baer, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “Under the department’s proposed order, Apple’s illegal conduct will cease and Apple and its senior executives will be prevented from conspiring to thwart competition in the future.”

The scheme was designed by Apple to combat its leading competitor in the e-book market, Amazon.com. In a bid to establish early market dominance, Amazon has often sold e-books to consumers at a loss – that is, for less than the wholesale price set by publishers.
In what’s been deemed an illegal counterstrategy, Apple entered into agreements with several U.S. publishers that set minimum e-book prices for all sellers, effectively ensuring that Amazon could not offer the books for a lower price than any other retailer. This, the court ruled, amounted to illegal price-fixing that artificially inflated e-book prices for U.S. consumers.

Apple, which lost the suit on July 10, will be forced to terminate its existing contracts with five U.S. publishers and will be prohibited from entering into similar agreements for five years, reports Apple Insider. The company will also have to allow competitors such as Amazon and Barnes and Noble to sell their e-books on iTunes without paying a commission to Apple.

The five publishers, all of which have settled with regulators, include Lagardere SCA’s Hachette Book Group Inc, News Corp’s HarperCollins Publishers LLC, Penguin Random House LLC, CBS Corp’s Simon & Schuster Inc and Verlagsgruppe Georg von Holtzbrinck GmbH’s Macmillan.

The penalties, the Department of Justice says, will “halt Apple’s anticompetitive conduct, restore lost competition and prevent a recurrence of the illegal activities.”

Apple said on Friday that it would appeal the injunction.

“Apple did not conspire to fix e-book pricing,” said company spokesman Tom Neumayr. “The iBookstore gave customers more choice and injected much-needed innovation and competition into the market.”

Shares of Apple were down 0.1 percent at $494.64 in morning trading.

On The Web:

Apple Barred from E-book Price-Fixing Agreements for Five Years
http://www.justice.gov/opa/pr/2013/August/13-at-877.html

Apple hit with U.S. injunction in e-books antitrust case
http://au.news.yahoo.com/technology/news/article/-/18816342/apple-hit-with-injunction-in-e-books-antitrust-case/

Judge hits Apple with e-book injunction, requires external compliance monitor
http://appleinsider.com/articles/13/09/06/judge-hits-apple-with-e-book-injunction-requires-external-compliance-monitor