Apple loses case over rigging of e-book prices

It faces $621m settlement for role in conspiracy to raise prices and force Amazon to do likewise

WASHINGTON • Apple faces a US$450 million (S$621 million) settlement, most of it going to customers of its e-books, after the US Supreme Court refused to review an appeals court's determination that the company had conspired with book publishers to raise the prices of digital books.

Consumers who overpaid will get cash and credits which they can use for future e-book purchases, the US Justice Department said in a statement.

Under the settlement, e-book buyers will receive US$400 million, while the lawyers involved will get US$50 million.

"Apple's liability for knowingly conspiring with book publishers to raise the prices of e-books is settled once and for all," said Assistant Attorney-General Bill Baer, who runs the department's anti-trust division.

Apple declined to comment.

APPLE IS LIABLE

Apple's liability for knowingly conspiring with book publishers to raise the prices of e-books is settled once and for all.

'' ASSISTANT ATTORNEY-GENERAL BILL BAER, who runs the US Justice Department's anti-trust division.

The case arose from Apple's 2010 entry into the e-book marketplace, which had been dominated by Amazon and its Kindle reader.

Apple and five publishers agreed on an arrangement in which Apple would get a 30 per cent commission and publishers were allowed to set the prices for their books, a tactic known as "agency pricing" that prevents discounting.

The publishers also agreed they would charge all outlets the same amount, meaning Amazon was also forced to raise its prices. E-books that had cost US$9.99 suddenly cost US$12.99 or US$14.99.

In 2012, the US Justice Department accused Apple and the five publishers of conspiring to raise e-book prices above Amazon's standard of US$9.99 for new titles. The publishers settled the 2012 antitrust case, but Apple went to trial.

Last year, a divided three-judge panel of the US Court of Appeals said the terms Apple had offered to the five publishers allowed them to engage in a price-fixing conspiracy.

In urging the Supreme Court to hear the case, Apple had said its actions had promoted competition.

"Following Apple's entry, output increased, overall prices decreased and a major new retailer began to compete in a market formerly dominated by a single firm.

"If a new firm's entry disrupts a monopoly and creates long-term competition, that is to be lauded, whether the previous prices were artificially high or artificially low," the brief said.

The appeals court disagreed.

"Competition is not served by permitting a market entrant to eliminate price competition as a condition of entry, and it is cold comfort to consumers that they gained a new e-book retailer at the expense of passing control over all e-book prices to a cartel of book publishers," Judge Debra Ann Livingston wrote for the majority.

The Supreme Court's refusal to hear the case means a victory for Amazon, which maintains a dominant position in e-book sales. Amazon said it is "ready to distribute the court-mandated settlement funds to Kindle customers".

Mr Len Edgerly, who hosts a weekly podcast on e-books called the Kindle Chronicles, said the outcome "feels like a vindication to let the market decide the price for e-books".

He said that he and his wife each received a couple of hundred dollars from the settlements paid earlier by book publishers in the case, and Apple's payment to e-book buyers, expected later this year, will be roughly double that amount.

NEW YORK TIMES, BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on March 09, 2016, with the headline 'Apple loses case over rigging of e-book prices'. Print Edition | Subscribe