Apple Facing $400M Repayment to E-Book Customers After Antitrust Lawsuit Loss

A federal appeals court had a split decision on June 30, 2015, ruling that Apple conspired with various top book publishers to increase e-book prices, violating antitrust law in e-book entry.

Los Angeles Times reported that judges from the 2nd Circuit Court of Appeals in New York had a 2-1 split decision against Apple. The decision consisted of 117 pages, with Judge Debra Ann Livingston writing that Apple pressured publishers to work together to stop the price drops for both electronic and print books. The federal appeals court also ruled that it was proper for District Court Judge Denise Cote to impose an injunction to prevent a recurrence a couple of years ago.

The recent decision would cause Apple to pay consumers $450 million, unless the company files another appeal and wins, based on a report by Reuters. Apple is expected to file another appeal.

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

In 2007, Kindle by Amazon was the top e-book product in the market until 2010, when Apple launched the iPad tablet. Amazon sold bestsellers and new releases close to or lower than whole sale prices, which threatened various publishers. The publishers conspired with Apple then approached Amazon to ask for better deals. Apple offered the publishers the opportunity to set their own prices and Apple would provide them a percentage of sales based on an agency pricing model.

Furthermore, the publishers agreed to a “most favored nation” clause, which required prices on Apple’s e-book store to be equivalent to the lowest price available anywhere. As a result, publishers would transfer all their contracts from e-book sellers like Amazon to the agency model that Apple set up. Prices for iPad books became as expensive as $19.99, compared to Amazon books, which previously sold for $9.99. Judge Raymond J. Lohier concurred with Livingston, saying that Apple and the publishers committed “corporate bullying” against Amazon, based on a report by Computer World.

The dissent came from Judge Dennis Jacobs, who stated that Apple and the publishers were forced to create a lower barrier to the e-book market. At the time, no publisher alone could battle Amazon. He described Apple’s actions as being “unambiguously and overwhelmingly procompetitive”.

Computer World also noted that Bill Baer, an assistant attorney general in the Antitrust Division of the Justice Department, stated that he was gratified by the court’s decision.