A federal appeals court Tuesday let stand a 2013 lower court ruling that concluded Apple conspired with several top book publishers to raise e-book prices. The Justice Department had accused Apple of unfairly taking control of a nascent market that had been dominated by Amazon.com.
Judges from the 2nd Circuit Court of Appeals in New York split on the decision 2-1.
In a 117-page decision, Judge Debra Ann Livingston wrote that Apple pressured publishers to band together to prevent price drops for books, both electronic and print. Apple had leveraged publisher frustration with Amazon’s $9.99 per book pricing on its Kindle reader as a bargaining chip, she said.
The publishers then “combined forces to grab control over price,” she wrote, referring to five of the “Big Six” publishers -- Simon & Schuster, HarperCollins, Macmillan, Penguin and Hachette.
“A coordinated effort to raise prices across the relevant market was present in every chapter of this story,” she added.
The story began with Apple’s 2010 launch of the iPad, a tablet that marketed its selection of e-books as a prominent feature. Until then, Amazon’s Kindle, released in 2007, had dominated the e-book market, accounting for 90% of all e-book sales within two years. Amazon sold many new releases and bestsellers at close to or lower than wholesale prices.
Publishers considered this practice a threat to their business model, Livingston said, and became determined to overcome it with the help of Apple, the newcomer eager for a foothold in the market. After negotiating attractive contracts with Apple, the publishers went to Amazon with demands for sweeter deals. Prices for iPad books could be set as high as $19.99.
Apple now may be ordered to pay $400 million to consumers, complying with a 2014 settlement of a class-action lawsuit brought by 33 states and territories.
Judge Raymond J. Lohier, in concurring with Livingston, said Apple and the publishers committed “corporate bullying” by teaming up against Amazon.
But Judge Dennis Jacobs disagreed, writing in a 38-page dissent that Apple joined with publishers as the only way to force a lower barrier to the e-book industry.
“No one publisher alone could counter Amazon,” he wrote. “Apple’s conduct … was unambiguously and overwhelmingly procompetitive.”
Apple disagreed with the ruling and denied that it fixed e-book prices.
“While we want to put this behind us, the case is about principles and values,” the company said in a statement Tuesday. “We know we did nothing wrong back in 2010 and are assessing next steps.”