N.Y. Judge: Apple Colluded to Raise E-book Prices

In a Friday, June 7, 2013 file photo, a sign displays the Apple logo outside of the company's headquarters in Cupertino, Calif. A federal judge ruled Wednesday, July 10, 2013, that Apple Inc. broke antitrust laws and conspired with publishers to raise electronic book prices.
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Even though those settlements removed the shackles that prevented Amazon from discounting, the $9.99 price for e-books that publishers dreaded has become increasingly rare.

For instance, a Simon & Schuster e-book published Tuesday, Brad Thor's "Hidden Order," was selling Wednesday for $12.74. Neil Gaiman's "The Ocean at the End of the Lane," released last month by an imprint of HarperCollins Publishers, cost $12.80. The same e-books were listed for $12.99 apiece in Apple's iTunes store.

Amazon declined to comment Wednesday.

The rising prices for e-books could be part of a nascent market's natural evolution rather than the by-product of a sinister scheme, according to Boston College Law School Professor David Olson.

"With Apple entering the scene, there were the beginnings of multiple platforms for e-books and distribution levels and instead of letting negotiation and pricing in the market shape itself, the court wants to freeze in time the price and the model that Amazon brought forth," Olson said.

In her ruling, Cote said the conspiracy harmed consumers in numerous ways. Some had to pay more for e-books, she said. Others bought a cheaper e-book rather than the one they preferred to purchase and others deferred a purchase altogether rather than pay the higher price.

Although she acknowledged that many of Apple's practices in its dealings with publishers would individually be legal, Cote said they collectively furthered the goal of raising e-book prices across the board.

Apple spokesman Tom Neumayr said the addition of the iBookstore to the iTunes mall "gave customers more choice, injecting much needed innovation and competition into the market, breaking Amazon's monopolistic grip on the publishing industry."

Cote's decision wasn't surprising. She had urged Apple to settle before trial, warning that the company only had a slim chance of winning.

Apple did little to change her mind during the trial. She identified five trial witnesses as "noteworthy for their lack of credibility," including Eddy Cue, a top Apple executive described as Jobs' right-hand man.

Bill Baer, an assistant attorney general for the Justice Department, hailed the ruling as "a victory for millions of consumers who choose to read books electronically."

Kapoor, the antitrust lawyer, believes Apple has a good chance to win in its appeal. He thinks much of the evidence illustrates Jobs' ability to negotiate smart deals and transform markets. Just because Jobs "understood the industry dynamics doesn't mean that Apple and the publishers all agreed to raise prices," Kapoor said.

Cote said a damages trial would follow, though none was immediately scheduled. A conference hearing is scheduled for Aug. 9.

Investors largely shrugged off Apple's legal setback. Apple's stock shed just $1.62 to close at $420.73.

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    Liedtke reported from San Francisco. AP National Writer Hillel Italie and AP Technology Writer Barbara Ortutay in New York contributed to this story.

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