A divided federal appeals court yesterday upheld a judge's ruling that Apple had conspired with five publishers to increase e-book prices, in a win for the US Justice Department.
By a 2-1 vote, the 2nd US Circuit Court of Appeals agreed the conspiracy violated federal anti-trust 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.
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 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 US 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.
The publishers the Justice Department said conspired with Apple include Lagardere SCA's Hachette Book Group, News Corp's HarperCollins Publishers, Penguin Group, CBS's Simon & Schuster, 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, US circuit judge Dennis Jacobs said he would have reversed Cote's 2013 ruling, finding that Apple's behaviour was pro-competitive in taking on Amazon, which controlled 90% 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 anti-trust laws".
Next steps
Meanwhile, Apple said it was assessing its next steps after the US court upheld a trial judge's decision.
In a statement issued after the 2nd US Circuit Court of Appeals in New York handed down the decision, the company maintained it did not conspire to fix e-book prices, as the US Justice Department contends.
"While we want to put this behind us, the case is about principles and values," Apple said. "We know we did nothing wrong back in 2010 and are assessing next steps."
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