U.S. District Court Judge Denise Cote‘s ruling in the Apple e-book price-fixing case is harsh in its assessment of Apple’s role in coordinating a scheme to raise the price of digital books by teaming up with other publishers.
“There is, at the end of the day, very little dispute about many of the most material facts in this case,” Cote said in her ruling on Wednesday, which Apple has said it will appeal.
Here's how Cote deconstructed Apple’s argument that its actions on e-book pricing were legal:
Questioning motives: In the course of the trial, Apple said that it was not looking to raise prices on anything but simply wanted to provide a better e-reading solution for consumers.
Cote said that while that may be true, it doesn’t change or excuse the fact that Apple’s pricing structure also raised prices.
“[There] was more to Apple’s entry into the trade e-book market than the presentation of innovative software on a remarkable device,” she wrote. “Apple’s entirely appropriate or even admirable motives do not preclude a finding that Apple also intentionally engaged with the Publisher Defendants in a scheme to raise e-book prices.”
Amazon’s dominance: Apple and publishers have said that they created their pricing model to challenge Amazon’s dominance in the market — about 90 percent of all e-book sales through 2009.
“If Apple is suggesting that Amazon was engaging in illegal, monopolistic practices, and that Apple’s combination with the Publisher Defendants to deprive a monopolist of some of its market power is pro-competitive and healthy for our economy, it is wrong,” Cote said.
She also noted that even if Amazon was engaging in unfair behavior, that two wrongs don’t make a right. “Another company’s alleged violation of antitrust laws is not an excuse for engaging in your own violations of law. Nor is suspicion that that may be occurring a defense to the claims litigated at this trial”
Publishers raise prices, not Apple: Taking on the tech giant’s assertion that publishers — not Apple — were ultimately responsible for raising digital book prices, Cote says that it’s clear from the testimony that Apple was willing to make the possibility of higher prices a main selling point in its negotiations.
“Apple is correct that the conspiracy required the full participation of the Publisher Defendants if it were to achieve its goals,” she said. “It is also correct that the Publishers wanted to change Amazon’s pricing policies and to raise e-book prices, and that they had wanted to do that for many months before Apple arrived on the scene. But, those facts do not erase Apple’s own intentions in entering into this scheme.”
And, she said, the publishers could not have acted without using the tech firm as an intermediary. “Apple was an essential member of the charged conspiracy and was fully complicit in the scheme to raise e-book prices even though the Publisher Defendants also had their own roles to play,” she said.
On the chilling effect on the industry: Cote is careful to acknowledge the argument Apple made in court -- that essentially punishing the company for trying to break into a new market will discourage others from doing so in the future. But, ultimately, she said, Apple’s actions when it entered the market were anticompetitive.
“While a Court must take seriously a prediction that its decision will harm our nation’s economy, particularly when made by skilled counsel on behalf of an esteemed company, it is difficult to see how competition will be stifled by the ruling in this Opinion.” Cote wrote.
“This Opinion’s findings arise from the specific events that unfolded in the trade e-book market as 2009 became 2010. It does not seek to paint with a broader brush.”
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