30
May2013

Department of Justice Blames Apple for E-books Price Fixing

A federal judge expressed her opinion that the Department of Justice will in fact prove that Apple orchestrated a price-fixing scheme with the publishers. It is uncommon for judges to speculate as to the outcome of a case prior to trial (the trial doesn’t begin until June 3). However, according to Thomson Reuters, the comments could put pressure on Apple to settle before heading to trial.

Despite these comments, U.S. District Judge Denise Cote, who oversaw pretrial hearings, noted that nothing is final until the trial takes place.

Some background:

Last year, the Department of Justice filed lawsuits against Apple, Inc. and five large publishing companies: HarperCollins, Simon & Schuster, Penguin, Hachette Book Group Inc. and MacMillian.

Recent filings that were made public show that Apple admitted to meeting with publishing companies in order to discuss e-book sales. According to Apple, the publishing companies made independent decisions as far as choosing to force Amazon to increase e-book pricing.

According to the Department of Justice, however, the meetings were intended to create a price fixing scheme. The scheme allegedly operated as follows:

Apple made agreements with publishing companies to create new pricing models that forced Amazon to sell their e-books at cost as opposed to below cost (which Amazon often did to generate customers).

This forced Amazon to raise their prices, and when the publishing companies made higher profits, they paid the money directly to Apple.

The Department stated that they have evidence in the form of emails, one of which documents correspondence between Steve Jobs and Rupert Murdoch, the chief of HarperCollins whose reputation precedes him these days. In these e-mails, Jobs allegedly writes to Murdoch, “throw in with Apple and see if we can all make a go of this to create a real mainstream e-books market at $12.99 and $14.99.”

While all five publishing companies have settled since the Department of Justice initially filed, Apple denies the accusations of price fixing and instead claims to have had a positive effect on the e-book market with its introduction of the iBookstore. According to a spokesman for Apple, the company looks forward to defending themselves in court on the matter.

Price fixing is a common example of an antitrust law that is broken in the business world. While antitrust laws with regard to unfair competition can be complex and varying, it is important to consult an attorney if you have questions. To learn more about the services we offer, visit pattersonlawfirm.com or call (312) 223-1699 to speak with one of our experienced attorneys.

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