July 16, 2014: Apple agrees to pay $450 million to resolve the Department of Justice’s antitrust case against the company over e-book pricing in the iBooks Store.
Cupertino stood accused of conspiring with five major book publishers to fix e-book prices. The five publishers all settled their claims outside of court, leaving only Apple to go to trial.
History of the iBooks lawsuit
The United States v. Apple Inc. antitrust case was filed in April 2012. It accused Apple, the Hachette Book Group, HarperCollins, Macmillan Publishers, Penguin and Simon & Schuster of conspiring to keep e-book prices high.
This came in response to Amazon’s charging $9.99 for many popular books on its Kindle e-book reader. This upset publishers, who said the low price for digital books diminished their profit margins. Apple, instead, planned to sell new books for $12.99 to $14.99 through its own channels. This would result in more money for publishers and Apple alike.
A damning piece of evidence surfaced in the form of a conversation between Apple CEO Steve Jobs and technology journalist Walt Mossberg soon after the iPad keynote. Mossberg asked why any customer would agree to spend $14.99 on an Apple e-book when they could buy the same thing from Amazon for $9.99.
“That won’t be the case,” Jobs responded.
“You won’t be $14.99 or they won’t be $9.99?” Mossberg asked.
“The prices will be the same,” Jobs said. “Publishers are actually withholding their books from Amazon because they’re not happy.”
Apple settles e-book lawsuit to avoid a damaging trial
Apple remained a bit player on the e-books front, with a tiny market share compared to Amazon. However, the threat that Apple represented (especially after the popularity of iTunes as a music distributor) meant that the iBooks case made headlines.
In July 2013, U.S. District Judge Denise Cote ruled that Apple was liable for colluding with the publishers to impede e-book competitors. A damages trial was due to begin in August 2014. Attorneys general and lawyers for a class-action group of customers sought a maximum of $840 million.
In the end, Apple folded and agreed to pay $450 million rather than go to trial. However, the company continued to assert that it did nothing wrong and would continue to appeal.
In addition to the payment, the court also appointed an antitrust monitor to watch over Apple’s activities, which caused Cupertino no end of headaches in the following years.