June 30, 2015 / 2:10 PM / 2 years ago

Apple conspired to fix e-book prices: U.S. appeals court

NEW YORK (Reuters) - A divided federal appeals court on Tuesday upheld a judge’s ruling that Apple Inc (AAPL.O) had conspired with five publishers to increase e-book prices, in a win for the U.S. Justice Department.

The Apple Inc. logo is seen in the lobby of New York City's flagship Apple store January 18, 2011. REUTERS/Mike Segar

By a 2-1 vote, the 2nd U.S. Circuit Court of Appeals agreed that the conspiracy violated federal antitrust law, and that the judge acted properly two years ago in imposing an injunction to prevent a recurrence.

The ruling would force Apple to pay consumers $450 million under a 2014 settlement of a class action with 33 state attorneys general and lawyers, unless it files another appeal and wins. The settlement was contingent on Apple’s civil liability being upheld.

“While we want to put this behind us, the case is about principles and values,” Apple said in a statement. “We know we did nothing wrong back in 2010 and are assessing next steps.”

Writing for the majority, Circuit Judge Debra Ann Livingston said Apple’s actions “unreasonably restrained trade,” rejecting arguments that the company acted independently with its own business interests in mind.

“The district court did not err in concluding that Apple was more than an innocent bystander,” Livingston wrote.

Assistant Attorney General Bill Baer welcomed the ruling, which he said “confirms that it is unlawful for a company to knowingly participate in a price-fixing conspiracy, whatever its specific role in the conspiracy or reason for joining it.”

The appeal followed a July 2013 decision by U.S. District Judge Denise Cote in Manhattan that Apple played a “central role” in a conspiracy with publishers to eliminate retail price competition and raise e-book prices.

The Justice Department, which secured the ruling following a non-jury trial, said the scheme caused some e-book prices to rise to $12.99 or $14.99 from the $9.99 price charged by market leader Amazon.com Inc (AMZN.O).

The publishers that the Justice Department said conspired with Apple include Lagardere SCA’s Hachette Book Group Inc, News Corp’s HarperCollins Publishers LLC, Penguin Group Inc, CBS Corp’s Simon & Schuster Inc and Verlagsgruppe Georg von Holtzbrinck GmbH’s Macmillan.

Professor Keith Hylton of Boston University School of Law said Tuesday’s ruling endorsed an “expansive view” of the law by allowing Apple to be held liable under a less-stringent standard than it advocated.

“The DOJ could feel emboldened in pursuing those cases with this theory of conspiracy,” he said.

In a dissenting opinion, U.S. Circuit Judge Dennis Jacobs said he would have reversed Cote’s 2013 ruling, finding that Apple’s behavior was pro-competitive in taking on Amazon, which controlled 90 percent of the market.

“Apple took steps to compete with a monopolist and open the market to more entrants, generating only minor competitive restraints in the process,” Jacobs wrote.

But Livingston said Jacobs’ theory “endorses a concept of marketplace vigilantism that is wholly foreign to the antitrust laws.”

The case is U.S. v. Apple Inc, 2nd U.S. Circuit Court of Appeals, No. 13-3741.

Additional reporting by Joseph Ax; Editing by Alden Bentley and Richard Chang

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