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Appeals court slams Apple on e-books price fixing

June 30, 2015 02:16 PM
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(Bloomberg)—Apple Inc., the world’s biggest technology company, orchestrated a price-fixing scheme in the electronic-book market, a federal appeals court in New York ruled, upholding a lower-court finding of antitrust violations.

The appeals court, in a sharply split 2-1 decision, let stand a July 2013 ruling by U.S. District Judge Denise Cote that Apple “played a central role” in conspiring with five publishers to fix the prices of electronic books. The differences among the appeals judges may make it more likely that the Supreme Court will take the case if Apple seeks to appeal.

Cote’s ruling, which came in a suit filed by the U.S. Justice Department and 33 state attorneys general, led to changes in how e-books are priced and imposed a monitor to ensure that Apple’s antitrust compliance policies are adequate.

In her ruling, Cote said Apple, No. 2 in the Internet Retailer 2015 Top 500 Guide, lost the case, in part, because of statements by its deceased founder, Steve Jobs, that government lawyers said showed Apple was targeting e-book leader Amazon.com Inc., No. 1 in the Top 500 Guide, in opening its own online e-book store.

“By organizing a price-fixing conspiracy, Apple found an easy path to opening its iBookstore, but it did so by ensuring that market-wide e-book prices would rise to a level that it, and the publisher defendants, had jointly agreed on,” Circuit Judge Debra Ann Livingston wrote in the majority opinion.

No conspiracy

“Apple did not conspire to fix e-book pricing and this ruling does nothing to change the facts,” Cupertino, Calif.-based Apple said in a statement. “We are disappointed the court does not recognize the innovation and choice the iBooks Store brought for consumers.”

An Apple spokesman, Josh Rosenstock, declined to say whether the company will appeal.

The dissenting judge, Dennis Jacobs, agreed with Apple’s arguments that it behaved legally and reasonably in setting up a new pricing structure to compete with Amazon.

“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. “Its conduct was eminently reasonable; no one has suggested a viable alternative.”

A third judge, Raymond Lohier, agreed with the majority ruling to uphold Cote.

“There is some surface appeal to Apple’s argument that the e-book market, in light of Amazon’s virtually uncontested dominance, needed more competition,” Lohier wrote. “But more corporate bullying is not an appropriate antidote to corporate bullying.”

The case is U.S. v. Apple Inc., 13-3741, U.S. Second Circuit Court of Appeals (Manhattan).

 

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