US Supreme Court denies Apple review of price-fixing judgment over e-books; Utah attorney general comments

ST. GEORGE – The U.S. Supreme Court denied Apple Inc. review of a lower court decision Monday, thereby upholding an appeals court decision that Apple violated antitrust laws in 2010 in the electronic book market. The high court’s refusal to review clears the way for distribution of $400 million by Apple to U.S. consumers who paid artificially-inflated prices for electronic books – an action brought by a 33-state coalition, including Utah, and the Justice Department.

In 2007, Amazon.com Inc. launched its Kindle device with digital copies of books, or e-books. In 2010, Apple launched its iPad and iBookstore.

In doing so, the Cupertino, California-based company asserted in its petition to the Supreme Court, it “dramatically enhanced competition in the e-books market, benefitting authors, e-book publishers, and retail consumers. Following Apple’s entry, output increased, overall prices decreased, and a major new retailer began to compete in a market formerly dominated by a single firm.”

The claims brought before the courts maintained that Apple’s agreements with book publishers vertically served to facilitate a horizontal conspiracy among the publishers allowing them to join forces and raise prices, even control or fix prices.

Apple aimed to compete for e-book sales against Amazon, which controlled 90 percent of the market and sold most popular books online for $9.99, the Associated Press reported, and Amazon’s share of the market dropped to 60 percent.

The U.S. Court of Appeals for the Second Circuit held in a 2-1 ruling in June 2015 that Apple was liable for conspiring with five major publishers to raise the prices of the e-books, challenging Amazon.com’s market dominance. Among other things, Apple argued its entry into the e-book marketplace was pro-competition. A dissenting judge called Apple’s actions legal, “gloves-off competition,” the AP reported.

Utah joined the group of 33 states led by Texas and Connecticut and the Justice Department in investigating and prosecuting the antitrust case against Apple and its co-conspirators.

In a news release Tuesday, Utah Attorney General Sean Reyes said:

While these are well-respected companies that do a lot of good for our communities, even good companies make mistakes. When companies engage in conduct that crosses the line, it is our job to make sure they are held accountable and to ensure that consumers are compensated for their losses. The anti-trust team from our office deserves to be acknowledged for their persistent efforts throughout this case.

The June 2015 appeals court ruling stemmed from a 2013 ruling by the U.S. District Court for the Southern District of New York. The District Court held Apple conspired to raise prices with: Penguin Group (USA), Inc. (now Penguin Random House); Holtzbrinck Publishers LLC doing business as Macmillan; Hachette Book Group Inc.; HarperCollins Publishers LLC; and Simon & Schuster Inc.

Delivering the decision of the appellate court, Circuit Judge Debra Ann Livingston wrote:

Plainly, competition is not served by permitting a market entrant to eliminate price competition as a condition of entry, and it is cold comfort to consumers that they gained a new ebook retailer at the expense of passing control over all ebook prices to a cartel of book publishers—publishers who, with Apple’s help, collectively agreed on a new pricing model precisely to raise the price of ebooks and thus protect their profit margins and their very existence in the marketplace in the face of the admittedly strong headwinds created by the new technology.

With the Supreme Court declining to review the appellate court decision, Apple has no further opportunity to contest its liability.

All five of the publishers settled prior to trial and signed consent decrees prohibiting them from restricting e-book retailers’ ability to set prices, the AP reported. As part of the settlement, the publishers paid a total of approximately $166 million in nationwide consumer compensation through consumer account credits.

Apple’s settlement with the states was contingent on the outcome of Apple’s appeal to the Supreme Court. With the high court now denying review, Daniel Burton, public information officer for Reyes’ office, said, Apple must pay the maximum contemplated amounts which include: $400 million to be distributed to consumers, including those represented by private counsel in a related class action; $20 million to the 33 states as reimbursement for attorney’s fees and costs and to resolve claims for civil penalties; and $30 million to private counsel in the related class action as reimbursement for attorney’s fees and costs.

Apple’s petition for certiorari, or request for review, was docketed with the Supreme Court as Apple v. U.S., 15-565. The petition including attachments of the lower court orders may be viewed here.

Email: jkuzmanic@stgnews.com

Twitter: @JoyceKuzmanic  @STGnews

Copyright St. George News, SaintGeorgeUtah.com LLC, 2016, all rights reserved.

 

 

 

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