Apple Loses e-Book Price Fixing Appeal, Ordered To Pay $450 Million In Class Action Settlement

Apple is still on the hook for a $450 million settlement as part of a class action lawsuit with 33 states and private individuals after losing an appeal on Tuesday. By a divided 2-to-1 vote, the 2nd U.S. Circuit of Appeals upheld the 2013 decision and sided with the U.S. Justice Department in finding that Apple responsible for conspiring with book publishers to jack up the prices of e-books.

The lawsuit was filed by the U.S. Justice Department back in 2012 and went to court the next year. Then in 2014, Apple agreed to pay $450 million to settle the suit, with most of the funds going to e-book buyers. The agreement was contingent on the outcome of appeal.

"We conclude that the district court correctly decided that Apple orchestrated a conspiracy among the publishers to raise e-book prices," wrote Second Circuit Judge Debra Ann Livingston. She added that the conspiracy "unreasonably restrained trade," thereby violating the Sherman Act, a federal antitrust law.

iBooks

What's at issue here is the more attractive "agency deal" that Apple offered publishers versus what Amazon was offering. At the time, Amazon controlled between 80-90 percent of the e-book market. Apple enticed publishers over to iBooks by giving them the power to set their own e-book pricing, with one caveat -- if the same e-book was being sold for less money by a retailer, they'd have to match that price.

Apple's attempt to lure publishers gave them negotiating power over Amazon, and as a result, e-book pricing went up. The U.S. Department of Justice and now two courts have all concluded that Apple knew its proposed agency deal would ultimately lead to higher e-book pricing.

"Apple did not conspire to fix e-book pricing and this ruling does nothing to change the facts. We are disappointed the Court does not recognize the innovation and choice the iBooks Store brought for consumers," Apple said. "While we want to put this behind us, the case is about principles and values. We know we did nothing wrong back in 2010 and are assessing next steps."

The next step will likely be another appeal.

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