Apple will ask the U.S. Supreme Court to overturn a federal judge’s finding that it conspired to fix the prices of ebooks when it launched its original iPad and iBook store in January 2010, according to FORTUNE (http://tinyurl.com/q85petu).
“This case . . . presents issues of surpassing importance to the United States economy,” the company argues in papers filed with the high court Wednesday. “Dynamic, disruptive entry into new or stagnant markets—the lifeblood of American economic growth—often requires the very type of” conduct that Apple engaged in, the company argues, and which U.S. District Judge Denise Cote of Manhattan found to be illegal in July 2013.
In June a federal appeals court ruled that Apple orchestrated a conspiracy with five publishers to increase ebook prices, in a victory for the U.S. Justice Department. The company is due to pay an US$450 million settlement.
By a 2-1 vote, the 2nd U.S. Circuit Court of Appeals agreed with a lower court judge that the conspiracy violated federal antitrust law, and that the judge acted properly in imposing an injunction to prevent a recurrence. Writing for the majority, Circuit Judge Debra Ann Livingston said that by organizing the conspiracy, “Apple found an easy path to opening its iBookstore,” while ensuring that marketwide prices rose to a level that Apple and the publishers wanted.
In April 2012 the United States Department of Justice filed an antitrust lawsuit against Apple, Hachette SA, HarperCollins, Macmillan, Penguin and Simon & Schuster in New York district court, claiming collusion over ebook pricing. The brouhaha centers on Apple’s move to change the way that publishers charged for e-books as it prepared to introduce its first iPad in 2010.
Traditionally, publishers sold books to retailers for roughly half of the recommended cover price. Under that “wholesale model,” booksellers were then free to offer those books to customers for less than the cover price if they wished.
Apple suggested moving to an “agency model,” under which the publishers would set the price of the book and Apple would take a 30% cut. However, Apple also insisted that publishers couldn’t let rival retailers sell the same book at a lower price.