Apple Must Pay $450 Million Fine After U.S. Supreme Court Rejects eBook Appeal
While Apple is gearing up for its fight with the U.S. Government on March 22nd in the San Bernardino iPhone case, the company lost an unrelated legal battle today. The U.S. Supreme Court today refused to hear Apple’s appeal in a case where it was found guilty of conspiring with five book publishers to raise the prices of eBooks, in effect harming competition and forcing customers to pay higher prices.
In July 2013, U.S. District Judge Denise Cote found Apple guilty of the charges based on a U.S. Justice Department investigation. In 2014, Apple reached a settlement agreement with the Justice Department and over 30 states that piled on with the lawsuit. Under the terms of the $450 million settlement — which Apple agreed to pending the outcome of its [now failed] appeal — the company must return $400 million to consumers, pay $20 million to the states and another $30 million in legal fees.
The Justice Department used internal emails and other correspondence with book publishers to prove that Apple persuaded book publishers to adopt an agency model which allowed them to remain in the driver’s seat with regards to pricing as opposed to letting resellers set the price. Apple (and the publishers) hoped to punish Amazon, which they accused of undermining the value of books buy selling them for $9.99.
Following Apple’s collusion with book publishers, priced jumped from the standard $9.99 to between $12.99 to $14.99.
The head of the Justice Department’s antitrust division applauded the Supreme Court’s decision, calling out Apple’s “cynical misconduct” and added that “Apple’s liability for knowingly conspiring with book publishers to raise the prices of e-books is settled once and for all.”
Interestingly enough, one of the pieces of evidence that the Justice Department used in its case against Apple was a seemingly innocuous 2010 interview that Walt Mossberg conducted with the late Steve Jobs after the launch of the iPad and iBookstore. Mossberg asks, “Why should she for $14.99 from your device when she can buy one for $9.99 from Amazon?” Jobs responds, “Well, that won’t be the case. The prices will be the same.”
You can watch the short encounter in the video below: