Emma Gallimore Mar. 15, 2016, 2:22pm

CUPERTINO – The U.S. Supreme Court recently refused to hear challenges to an antitrust case that will force Apple Inc. to pay $450 million after a lower court found that the company contributed to a scheme to fix prices for electronic books.

“In this case, Apple basically got the book publishers to agree with each other to impose higher prices on Amazon on ebooks,” Herbert Hoven, an expert in antitrust law at the University of Iowa College of Law, told the Northern California Record.

The U.S. Department of Justice filed against Apple, accusing the technology giant of leading a price-fixing conspiracy during its introduction of the iPad tablet. In introducing the iBookstore feature for the iPad, Apple was attempting to compete with Amazon, which had more than 80 percent of the market share at the time.

According to the lawsuit, Apple worked with five of the big six publishers to create a system by which Apple, not the publishers themselves, would set book prices. Those publishers were Hachette Book Group, HarperCollins Publishers LLC, Simon & Schuster Inc., Pearson PLC’s Penguin Group and the Macmillan unit of Verlagsgruppe Georg von Holtzbrinck GmbH.

“The core of the suit is the ability of a private firm to force another firm to raise consumer prices. The goal of the antitrust laws ultimately is low prices; this is a fairly orthodox case in that respect,” Hoven said.

U.S. District Judge Denise Cote thought so too. In July 2013, she ruled against Apple and ordered changes to Apple’s business practice.

After that ruling, more than 30 states sued Apple under consumer protection statutes. Apple settled out of court, agreeing to pay $400 million to consumers and $50 million to states and for attorney’s fees if the decision was affirmed on appeal.

By refusing to hear the case, the Supreme Court has given its tacit approval to the ruling and Apple will have to pay the agreed upon sum.

The publishers had already settled out of court, agreeing to pay $166 million to states and consumers.

Consumers will be reimbursed for the overpayment on books through credits that they can apply to future ebook purchases. Meanwhile, prices for ebooks have fallen back down to normal range for the medium.

The overarching impact of the case is that no reseller can force publishers to set prices.

“It means that the market for electronic books will be set by, the prices will be set by competition, the book publishers cannot agree on a price, and neither Amazon nor Apple can force the publishers to raise the price of ebooks just for their own protection,” Hoven said.

The case falls well within established case law, though nothing like it has been heard in decades. Normally price fixing cases involve sellers, not resellers.

"The real lesson in this case is Apple is not a book publisher, Apple is vertically related. It’s a book reseller and the answer is if a reseller colludes with a group of price fixers it can also be liable under the antitrust laws.”

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Organizations in this Story

University of Iowa
5 W Jefferson St
Iowa City, IA 52245

Apple, Inc
1 Infinite Loop
Cupertino, CA 95014

U.S. Supreme Court
1 First St NE
Washington, DC 20543

U.S. Department of Justice
950 Pennsylvania Ave NW
Washington, DC 20530

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