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article imageApple found guilty of fixing e-book price

By Eko Armunanto     Jul 11, 2013 in Business
Apple facilitated a conspiracy with major book publishers to raise the price of e-books, costing consumers millions of dollars, Manhattan Judge Denise Cote, ruled Wednesday. The conspiracy was created to challenge Amazon's dominance in the e-book market.
The technology giant, which was eager to establish its iPad as an e-reading device, handed book publishers the power to set prices, as long as they guaranteed Apple a 30 percent cut of the profits and pledged that no other retailer would be able to undercut it. Publishers were concerned that Amazon had devalued its products by establishing the standard price of e-books as $9.99, but was able to push prices up to $12.99 and in some cases $14.99 after signing the Apple deal.
Apple’s defense throughout the proceedings was that it wanted to increase choices and lower prices for customers – something it claims it managed to do on bestselling titles. The closely-watched trial provided a rare glimpse into the secret negotiations and hardball tactics employed by the publishers – Macmillan, Penguin, Hachette, HarperCollins, and Simon & Schuster – and Apple, who were intent on defeating Amazon’s strategy of discounting e-book best sellers in order to drive sales of its Kindle e-book reader. During the trial, the government described how publishing executives engaged in cloak-and-dagger secret meetings at upscale Manhattan restaurants during which they plotted the conspiracy, and later tried to conceal their communications “to avoid leaving a paper trail.”
As early as 2008, executives at MacMillan and Hachette discussed ways to get Amazon to increase e-book prices. All of the publishers expressed frustration in 2009 and began campaigning for prices to be raised in newspapers and in private dinner meetings.
"On a fairly regular basis, roughly once a quarter, the CEOs of the publishers held dinners in the private dining rooms of New York restaurants, without counsel or assistants present, in order to discuss the common challenges they faced, including most prominently Amazon's pricing policies," said US district judge Denise Cote.
In a statement emailed to TIME, Apple maintained its innocence. “Apple did not conspire to fix e-book pricing and we will continue to fight against these false accusations,” said Apple spokesman Tom Neumayr. “When we introduced the iBookstore in 2010, we gave customers more choice, injecting much needed innovation and competition into the market, breaking Amazon’s monopolistic grip on the publishing industry. We’ve done nothing wrong and we will appeal the judge’s decision.”
The judge ordered a new hearing to determine damages to be imposed on Apple, said the BBC. Five publishers that were originally named as defendants alongside Apple have already reached settlements. Penguin settled its case for $75 million (£49 million). Hachette, HarperCollins and Simon & Schuster created a $69 million fund for refunds to consumers, while Macmillan settled for $26 million. Cited in the BBC report, US Assistant Attorney General Bill Baer called the ruling "a victory for millions of consumers who choose to read books electronically". He said the judge agreed with the Justice Department and 33 state attorneys general that executives at the highest levels of Apple orchestrated a conspiracy with five major publishers to raise prices.
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