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Apple loses e-book price fixing case, celebrates App Store anniversary with gifts

A judge sided with the Department of Justice against Apple Wednesday, ruling that the technology company had conspired to fix prices for e-books. Apple was accused of colluding to undermine Amazon’s dominance of the market, and five publishers allegedly involved in the scheme have already agreed to a settlement. U.S. District Judge Denise Cote issued the ruling:

Cote said the conspiracy resulted in prices for some e-books rising to $12.99 or $14.99, when Amazon had sold for $9.99.

“The plaintiffs have shown that the publisher defendants conspired with each other to eliminate retail price competition in order to raise e-book prices, and that Apple played a central role in facilitating and executing that conspiracy,” Cote said.

“Without Apple’s orchestration of this conspiracy, it would not have succeeded as it did in the spring of 2010,” she added.

Apple did not immediately respond to a request for comment.

Cote issued her 159-page decision after a non-jury trial that ended on June 20.


Read Cote’s full decision here; find excerpts here. The trial gave observers a rare view of internal deliberations at Apple:

Testimony from Apple executives including Eddy Cue, senior vice president of Internet software and services, shed light on how he and Apple’s late co-founder, Steve Jobs, reached out to publishers and orchestrated deals that guaranteed Apple would get 30 percent of the revenue from sales.

“This result is a victory for millions of consumers who choose to read books electronically,” Assistant U.S. Attorney General Bill Baer said in a statement after the Wednesday morning. “Companies cannot ignore the antitrust laws when they believe it is in their economic self-interest to do so. This decision by the court is a critical step in undoing the harm caused by Apple’s illegal actions.”

But Cue denied that Apple had gone into the negotiations with the intent to raise prices.

The ruling could also have broader implications for the technology industry, as Apple, Amazon, Google and others grapple with government efforts to regulate their control over users’ access to books, movies, music and other online and mobile content.

Hayley Tsukayama

Because of the previous settlements in the case, book prices online have already begun to fall:

Assistant Attorney General William Baer mentioned the changes in a statement after the ruling, saying, “Through today’s court decision and previous settlements with five major publishers, consumers are again benefitting from retail price competition and paying less for their e-books.”

HarperCollins was one of three book publishers to settle charges with the Justice Department when the case was first filed in April, and prices for its books on Amazon began dropping in September. According to a chart tracking e-book prices through April on Digital Book World — a Web site that covers the e-book industry — prices dropped again when other publishers, including Macmillan, Hachette and Simon & Schuster, began allowing retailers such as Amazon to apply their own discounts to books.

Hayley Tsukayama

See a chart showing book prices over time here. Also Wednesday, Apple marked the fifth anniversary of its App Store with giveaways to customers:

Starting Monday, the company began offering 10 of its most popular apps, including the journaling app “Day One,” photo editor “Over” and games such as “Infinity Blade,” “Tiny Wings,” and “Where’s My Water,” for free. The company is also offering “Barefoot World Atlas,” “How to Cook Everything,” “Traktor DJ for iPhone,” “Badland,” and “Superbrothers: Sword & Sorcery EP” in its list of giveaways.

The deals are only available for a “limited time,” so those interested in picking up the free apps should move sooner rather than later.

The app store, which will celebrate is official five-year anniversary on July 10, initially launched in 2008 with 500 apps, the company said in timeline featured on the App Store. It logged 10 million app downloads in the first weekend.

As of May 2013, the company said, there are now over 850,000 apps available and the store passed its 50 billionth download. That works out to over 800 downloads per second, Apple says.

Hayley Tsukayama

The price of Apple shares fell earlier this week on a report that the company had cut production:

Analyst Brian Blair of Wedge Partners said in a note that the firm has cut smartphone production by a fifth — planning to make between 90 million and 100 million rather than an original projected range between 115 million to 120 million. The cuts, the report said, include production for the iPhone 4S, iPhone 5 and as-yet unreleased (and unconfirmed) next generation of the iPhone. . .

Blair said the lower production is a reaction to the overall slowdown of the premium smartphone market. Apple’s perceived slowdowns tend to face closer scrutiny than those of other firms — particularly amid lingering questions about its ability innovate since the 2010 death of co-founder Steve Jobs — but news of a slowing phone sales should sound familiar to anyone paying attention to earnings from Samsung and HTC last week.

Both smartphone firms projected lower-than-expected sales that escalated worries that the high end of the smartphone market has reached a peak. A majority of Americans now own smartphones and there has been considerable grumbling that the last couple of models from manufacturers such as Samsung or Apple have been more evolutionary than revolutionary.

With growth poised to jump most in emerging smartphone markets such as China, Latin America and Eastern Europe, analysts say that there will be more demand among these first-time smartphone owners for cheaper phones, rather than top-of-the-line models.

Hayley Tsukayama

Shares have since recovered. For more on Apple’s new mobile operating system, iOS 7, continue reading here.

Max Ehrenfreund writes for Wonkblog and compiles Wonkbook, a daily policy newsletter. You can subscribe here. Before joining The Washington Post, Ehrenfreund wrote for the Washington Monthly and The Sacramento Bee.



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