Apple

Apple to Pay $450 Million After Losing Federal Appeal in E-Books Case

Apple to Pay $450 Million After Losing Federal Appeal in E-Books Case

Apple flagship store on 5th Ave in New York.

Image credit: Reuters | Brendan McDermid

A divided federal appeals court on Tuesday said Apple orchestrated a conspiracy with five publishers to increase e-book prices, in a victory for the U.S. Justice Department.

By a 2-1 vote, the 2nd U.S. Circuit Court of Appeals agreed with a lower court judge that the conspiracy violated federal antitrust law, and that the judge acted properly in imposing an injunction to prevent a recurrence.

Writing for the majority, Circuit Judge Debra Ann Livingston said that by organizing the conspiracy, "Apple found an easy path to opening its iBookstore," while ensuring that marketwide prices rose to a level that Apple and the publishers wanted.

The ruling will uphold not just Apple's civil liability but also the terms of an injunction that limited its agreements with publishers.

The decision also means Apple will be required to pay $450 million as part of a related settlement with 33 attorneys general and lawyers for a class of consumers. The accord had been contingent on Apple's liability being upheld.

Neither Apple nor the Justice Department, which had pursued the civil lawsuit to trial, responded immediately to requests for comment.

The appeal followed a 2013 decision by U.S. District Judge Denise Cote in Manhattan finding that Apple played a "central role" in a conspiracy with publishers to eliminate retail price competition and raise e-book prices.

The Justice Department, which secured the ruling following a non-jury trial, said the scheme caused some e-book prices to rise to $12.99 or $14.99 from the $9.99 price charged by the dominant player in the market, Amazon.com Inc.

The publishers that the Justice Department said conspired with Apple include Lagardere SCA's Hachette Book Group Inc, News Corp's HarperCollins Publishers LLC, Penguin Group Inc, CBS Corp's Simon & Schuster Inc and Verlagsgruppe Georg von Holtzbrinck GmbH's Macmillan.

In a dissenting opinion, U.S. Circuit Judge Dennis Jacobs said he would have reversed Cote's 2013 ruling, finding that Apple's behavior was pro-competitive in taking on a "monopolist," Amazon, which controlled 90 percent of the market.

"Apple took steps to compete with a monopolist and open the market to more entrants, generating only minor competitive restraints in the process," Jacobs wrote.

The case is U.S. v. Apple Inc, 2nd U.S. Circuit Court of Appeals, No. 13-3741.

(Additional reporting by Joseph Ax)

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