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Apple Loses E-Book Price Fixing Case


Apple is vowing to fight a decision handed down today in a federal district court in New York. Judge Denise Cote ruled that Apple did conspire with five major publishing companies to fix the price of e-books. In her ruling, the judge said the conspiracy would not have succeeded without Apple's orchestration. The publishers have already settled the case, but Apple continues to maintain that it has done nothing wrong.

NPR's Lynn Neary reports.

LYNN NEARY, BYLINE: At the end of the day, Judge Cote said, there was very little dispute about many of the most material facts in the case. Apple knew that publishers were unhappy with the 9.99 price that Amazon had set for e-books and were looking for a way to put pressure on Amazon. Apple, which was about to launch the iPad, proposed a new way of pricing - the agency model, which would allow the publishers to set the price of the book, not Amazon. As a result of the agreements reached between Apple and the publishers, the price of e-books did rise.

James Grimmelmann, a law professor at the University of Maryland, says the judge laid out a convincing case that when Apple began talks with the publishers, they all knew exactly what they were doing.

JAMES GRIMMELMANN: The publishers wanted to transition to agency. But they were afraid of doing it on their own, but they would be happy to jump if Apple said let's all jump at the same time. So by saying jump, Apple was able to organize an effective conspiracy.

NEARY: Grimmelmann says Apple uses the agency modeled in other parts of its business but this decision should have no effect on that.

GRIMMELMANN: Doesn't say there is anything wrong with selling on the agency model where they take a commission; nothing wrong with having fixed priced buckets. It was purely about Apple's negotiating tactics in the run-up to the launch of the iBooks store. This means that for the most part, the app store, the music store, those things should be unaffected.

NEARY: Many observers expected the decision to go against Apple. And Grimmelmann believes it will be hard to win on appeal. But Apple is aggressively maintaining its innocence, saying that it helped break, quote, "Amazon's monopolistic grip on the publishing industry."

James McQuivey, of Forrester Research, says Apple seems to want to clear its name.

JAMES MCQUIVEY: Frankly, that's unnecessary. Apple's name is fine and consumers aren't mad about this. In fact, they barely noticed. So it's time for Apple to move on.

NEARY: McQuivey says the five publishing companies' decision to settle rather than go to trial in the first place indicated they are beginning to move on.

MCQUIVEY: One of the things that publishers had to learn from this whole experience was that two or $3, up or down, does not dramatically change the fact that your business is being altered by digital and you need to alter with it. And trying to maintain some kind of hypothetical price value in the mind of the consumer is just not worth anybody's time.

NEARY: McQuivey believes this decision will have little effect on consumers. The price of e-books seems to be fluctuating right now. But after the ruling was announced, the Justice Department issued a statement calling it a victory for millions of consumers. It went on to say, quote, "companies cannot ignore antitrust laws when they believe it is in their economic self-interest to do so."

Judge Cote said she will set a date for a trial for damages in the future.

Lynn Neary, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

Lynn Neary
Lynn Neary is an NPR arts correspondent covering books and publishing.