Accused of playing a central role in a conspiracy with publishers to eliminate retail price competition and raise e-book prices, Apple says it has done nothing wrong.
“Apple did not conspire to fix e-book pricing, and we will continue to fight against these false accusations,” said an Apple spokesman. “When we introduced the iBookstore in 2010, we gave customers more choice, injecting much-needed innovation and competition into the market, breaking Amazon’s monopolistic grip on the publishing industry.”
Apple argues that its entry into e-books in 2010 injected much needed innovation and competition into the market. Before Apple entered the e-book market, Amazon´s strategy involved buying e-books at wholesale prices and then selling them below cost to promote its Kindle reading device. This damaged publishers by driving sales away from brick and mortar outlets.
Apple convinced publishers to enter into "agency agreements," in which publishers were able to set prices and then pay 30 percent commissions to the Cupertino, California-based company.
Critical to those agreements, however, were the most favored nation clauses. With Apple able to match any lower prices in the market, publishers forced Amazon to adopt the agency model as well, thus raising prices for consumers, according to Cote´s ruling.
Evidence in the case included emails from Apple´s late co-founder Steve Jobs to News Corp executive James Murdoch that the government said reflected Jobs´ desire to boost prices and "create a real mainstream e-books market at $12.99 and $14.99."
Several publishers settled before trial and agreed to pay more than $166 million combined to benefit consumers. They also agreed to end their pricing agreements with Apple.
Apple is, however, in the enviable position of being able to afford such a costly proceeding and hundreds of millions in potential civil damages.
The decision could nonetheless set a precedent for other tech companies that are trying to develop new markets.